While US markets were buoyed last week by increased expectations of a rate cut, Australian investors remain cautious ahead of tomorrow’s (10 December) Reserve Bank of Australia decision on interest rates Down Under.
The S&P/ASX200 dipped 36.10 points, or 0.43%, to 8,384.80 points at 10.31am AEDT. The index has lost 0.61% for the last five days, and sits 1.52% below its 52-week high.
ANZ says the “ducks are lining up” for a 25-basis-point rate cut by the US Federal Reserve this month.
“November labour market data affirmed that rebalancing continued in the US, supporting the Fed’s easing bias,” ANZ economists Felix Ryan, Brian Martin and Daniel Hynes says.
“Excluding the government, health and education sectors, payroll growth remained below its long-run trend.
“Meanwhile, at 4.2%, the unemployment rate is at its highest since the northern summer and near levels that prompted the FOMC to start the cutting cycle with a 50bp rate cut.
“The labour market report validates our expectation that the FOMC will cut rates by 25bp at its upcoming meeting this month.”
However, in Australia rate cuts are still looking likely to be some way off, with the market pricing in a 9% expectation of an interest rate decrease to 4.10% at the next RBA Board meeting.
As of 6 December, the ASX 30 Day Interbank Cash Rate Futures December 2024 contract was trading at 95.675.
The RBA Rate Indicator shows market expectations of a change in the official cash rate. The indicator calculates a percentage probability of an RBA interest rate change based on the market determined prices in the ASX 30 Day Interbank Cash Rate Futures.
Nine of the 11 sectors were lower in early trade today (9 December) led by materials with a 0.60% retreat. Energy edged back 0.09%.
Utilities is the best performing sector, gaining 0.08% on Monday and rebounding from its recent decline. The sector is off 1.13% for the past five days.
Arcadium Lithium (ASX:LTM) bucked the pull of the broader materials sector to advance 2.02% to $8.10.
On the other end of the scale, aluminium heavyweight Alcoa (ASX:AAI) dropped 6.27% to $66.58, gold miner Westgold Resources (ASX:WGX) slid 3.27% to $2.82, lithium producer Pilbara Minerals (ASX:PLS) declined 2.67% to $2.19 and iron ore miner Fortescue (ASX:FMG) fell 2.26% to $19.05.
The S&P/ASX200 is Australia’s leading share market index and contains the top 200 ASX-listed companies in terms of market capitalisation, and accounts for about 80% of the country’s equity market. The index is designed to measure the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalisation.
It is recognised as the institutional investable benchmark in the country.
Write to Angela East at Mining.com.au
Images: ASX & Reserve Bank of Australia
