The Australian sharemarket faces a cautious Monday opening, bracing for an anticipated fifth interest rate rise from the Reserve Bank of Australia (RBA) on Tuesday. Economists widely expect the cash rate to reach an 18-year high of 4.85 per cent. This move aims to combat persistent inflation, with recent data showing headline inflation at 3.9 per cent year-on-year and core inflation at 3.7 per cent, both exceeding the central bank’s 2.5 per cent target.
Money markets indicate a high probability of a quarter-point tightening. Major Australian banks and several economists anticipate this increase could mark the peak of the current tightening cycle. Investors will closely scrutinise the RBA’s policy statement and media conference for future outlook, with Deputy Governor Andrew Hauser’s speech on Thursday offering further insights.
Globally, investor sentiment dampened on Friday, contributing to declines across major US benchmarks. Concerns that substantial artificial intelligence (AI) investments might not deliver sufficient returns, alongside reports of a hack at Binance, the world’s biggest cryptocurrency exchange, saw cryptocurrency prices fall. Meanwhile, oil prices surged to six-month highs, driven by fears of an escalation in the Iran conflict following the US midterm elections.
As US midterm elections conclude, markets prepare for potential shifts. National Australia Bank noted the risk of renewed Middle East tensions post-election, potentially prolonging energy supply shortages. Attention also turns to US non-farm payrolls on Friday and upcoming earnings from Palantir and Apple. The influential AI sector faces scrutiny, with expectations of stricter regulation post-election and inherent volatility due to its rapidly evolving nature.
