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Highlights
- Australian shares are likely to edge down today (7 June 2022).
- RBA’s afternoon meeting to discuss interest rate hikes and its inflation handling tactics remains key for investors.
- Chinese Covid restriction easing seems to be cheering global and commodity markets.
Australian shares are predicted to slip further below today as the Reserve Bank meets in the afternoon to discuss interest rates again. It is anticipated that the Federal Reserve will raise the interest rates to tackle the ‘worst inflation in decades.
The yield on the US 10-year note has jumped back over 3% and appears to be moving toward its highest since 2018. Investors, in this backdrop, are worried if the Fed’s aggressive moves will be quick enough to cause a recession.
While the Fed measures financial conditions, like jobs, wage rates and others, it also looks at how prices are behaving in the securities markets.
On Wall Street, securities are witnessing gains, and even the European and Asian stock markets are up. The Chinese authorities have relaxed Covid-19 restrictions, easing roadblocks in the world’s second-largest economy and smoothening global supply chains.
On the Global front:
The May jobs report released last Friday showed the labor market is somewhat stronger than what the economists expected. The US unemployment has dropped to its lowest level since 1969, a 50-year low of 3.6%. However, big swings are expected on Wall Street this week, as the government is expected to release its latest monthly inflation update.
The European Central Bank is preparing to announce an end to its bond purchases this week and formally start to raise borrowing costs in July. The ECB also has plans to provide more support to vulnerable euro-area debt markets if they are hit by a selloff.
Chinese regulators are expected to ease curbs on its tech giant Didi Global Inc. and other US-listed tech majors. In anticipation, these stocks are gaining on the NASDAQ. Also, Beijing’s latest Covid restrictions easing has boosted speculations of reduced supply-chain pressures.
This week investors will be keen for -
- Reserve Bank of Australia policy decision and the World Bank’s “Global Economic Prospects” report, due today.
- The Indian Reserve Bank’s rate decision and OECD’s economic outlook are due on Wednesday.
- European Central Bank rate decision and Christine Lagarde’s briefing on Thursday, alongside Chinese data for trade, new yuan loans, money supply and aggregate financing.
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On the commodities front:
At around 6:15 AM AEST, the global oil benchmark-Brent crude, slipped 0.2%, and WTI fell about 0.3%. Oil prices were edging lower post a choppy trade session on Monday. The prices were buoyed by Saudi Arabia raising its July crude oil prices in an anticipation that an increased output target for OPEC+ oil producers would ease up the tense supply.
Dalian iron ore futures jumped to a 10-month high on Monday, pushed by decreasing stocks of the steelmaking ingredient at Chinese ports. Coking coal, another steelmaking input, too extended gains and went on to hit a six-week peak as Chinese markets were standing on rebound expectations.
Do Read- Commodity wrap-up: Iron ore surges as China eases COVID-19 curbs
