ASX 200 to open higher ahead of RBA meeting

Summary

  • ASX 200 is set to open 0.25% up or 16 higher as the US markets’ strong closing has improved the sentiments.
  • The Reserve Bank of Australia will be deciding on the cash rate in its meeting this afternoon.
  • Gold prices stormed higher overnight as the weakness in the bond yields and US dollar gave the precious metal a boost.

On Monday, the ASX 200 had a choppy trading session and closed 0.04% up, at 7028.8, after falling from the day’s high of 7068.4. In line with the sideways trend, the benchmark index is oscillating around 7,000 mark since quite a few session. Today, the Australian market is set to open 0.25% up or 16 higher as the US markets’ strong closing has improved the sentiments.

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The Reserve Bank of Australia will be deciding on the cash rate in its meeting this afternoon. According to the lasts cash rate Futures, there is a very high probability of a rate cut to zero.

On Wall Street, the Dow Jones closed the session 0.7% up, at 34,113.2 which is the second highest closing yet. The S&P 500 was also up 0.27%, to 4,192.7 while the NASDAQ lost 0.48% to 13,895.13, closing near the low of the day.

A fall in high-flying tech and related stocks, including Amazon, Tesla Inc and Salesforce.com, pressured the NASDAQ, as growth-oriented shares slid. However, markets in China, Japan and Britain were closed for public holidays that kept trading volumes thin.

Read More: Five buzzing hot stocks for the day

According to Reuters, 303 companies that have reported their earnings so far, 87.1% have beaten the analysts’ estimates. The S&P 500 companies’ earnings are expected to rise 46.3% in the first quarter year over year, almost double the rate forecast at the start of April, Refinitiv IBES data estimated.

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The dollar index traded lower, making gold more affordable for holders of other currencies, while falling Treasury yields reduced the opportunity cost of holding non-interest-bearing gold.

The primary reason for the downtick in the US dollar was that the yield on Treasury bonds retreated on data depicting US manufacturing activity grew at a slower rate in April 2021. The dollar index fell 0.335%, with the Australian dollar rising 0.63% to 0.7758.

The yield on the 10-year US Treasury note traded 2.3 basis points lower at 1.6082% after a shortage of inputs restricted factory output as massive fiscal stimulus unleashed pent-up demand.

In Europe, the equity markets notched up higher after the European Commission outlined plans to loosen COVID-19 restrictions on tourism sector. A robust earnings season and a strong factory and retails sales data also uplifted investors’ sentiments.

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Cryptocurrency Ethereum had scaled to a new record high of above US$3,000, gaining over 11% In a single day as investors bet on its increased adoption. Its 2021 gain of 325% has eclipsed that of its bigger rival, Bitcoin.

Read More: Ether up 4x this year, all eyes on Ethereum 2.0

Gold price surged higher

Gold prices stormed higher overnight as the weakness in the bond yields and US dollar gave the precious metal a boost.

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Spot gold prices rose 1.40% to US$1,793.42 an ounce, while the US gold Futures settled 1.4% higher at US$1,791.80 an ounce.

Australian gold miners such as Newcrest Mining Limited (ASX:NCM), Resolute Mining Limited (ASX:RSG) and Northern Star Resources Limited (ASX:NST) could storm higher today.

Read More: Newcrest (ASX:NCM) to go ahead with expansion across geographies

Crude oil traded higher

Oil rose more than 1% as Chinese economic figures and US vaccination rate pointed to a robust recovery in demand in the world's two largest economies.

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Brent crude Futures closed up 80 cents at US$67.56 a barrel, while the WTI crude Futures rose 91 cents to settle at US$64.49 a barrel.

Oil companies such as Santos Limited (ASX:STO), Woodside Petroleum Limited (ASX:WPL) and Beach Energy Limited (ASX:BPT) could lead the Energy sector.

Read More: Santos (ASX:STO) to Maximise Bayu-Undan Value, Approves $235Mn FID


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