The two major themes currently dominating the Australian economy are expected to pop up in the Reserve Bank’s messaging this week: a red-hot housing market and the policy implications of a rapidly improving economy.
The central bank’s April board meeting today is the first of two RBA events landing this holiday-shortened week, the second being the bank’s semi-annual financial stability review on Friday.
The board’s third meeting of 2021 is not expected to herald a shift in the official cash rate, but it does come at a time when inflation concerns are roiling hyper-sensitive equity markets.
Yields on 10-year Australian government bonds entered the Easter long weekend not far off February’s two-year peak, indicating that while investors are confident the economy is growing, they are also fearful a sooner-than-expected rate hike will be needed to keep consumer prices in check.
Commonwealth Bank senior economist Belinda Allen noted that while the economic data has only improved since the RBA’s March policy statement, Governor Philip Lowe may even push back this week against premature policy tightening.
Stocks on Wall Street notched broad gains last night as investors welcomed more signs that the economy is on the path to recovery,
The S&P 500 rose 1.4 per cent to an all-time high after closing above the 4,000-point mark for the first time last Thursday.
The Dow Jones Industrial Average also set a record high, as the market extended its recent run of gains. Technology companies powered much of the rally, which was a reaction to encouraging data on the economy.
The US government reported last week that employers went on a hiring spree in March, adding 916,000 jobs, the most since August. Traders had a delayed reaction to the encouraging jobs report, which was released on Friday when stock trading was closed. Investors were further encouraged by a report Monday showing that the services sector recorded record growth in March as orders, hiring and prices surged.
Both employment and the services industry have been lagging other areas of the economy throughout the recovery. Analysts have said that both need to show signs of growth in order for the recovery to remain on track.
COVID-19 and the potential for a spike in cases remains a concern, but the strong rollout of vaccinations is making an eventual return to normal for many people seem clearer and closer.
“The jobs report underscored the rebound in the labor market,” said Quincy Krosby, chief market strategist at Prudential Financial.
“The only thing that can stymie this rebound, this recovery, will be that COVID-19 launches another wave.”
The S&P 500 rose 58.04 points to 4,077.91. The benchmark index is coming off two straight weekly gains. The Dow picked up 373.98 points, or 1.1 per cent, to 33,527.19. The Nasdaq composite gained 225.49 points, or 1.7 per cent, to 13,705.59.
ASX future contract up 23 points, or 0.4 per cent, at 6826.0
- Australian dollar at 76.52 US cents, up from 76.14 US cents on Friday
- Wall Street on Thursday: Dow +1.1%, S&P500 +1.4%, Nasdaq +1.7%
- European markets closed for Easter holiday
- Spot gold unchanged $US1728.25 per ounce
- Brent crude -4.1% to $US62.22 a barrel, US oil -4.4% to $US58.75 a barrel
- Iron ore +0.5% to $US168.48 a tonne
- 10-year yield: US 1.70% Australia 1.83% Germany -0.33%
- Bitcoin flat at $US58,760
Good morning, and welcome back to Markets Live after a four-day break.
Alex Druce still has a bit of Easter chocolate to get through, but he’ll soldier on regardless with today’s blog.
The ASX is expected to rise at the open after Wall Street closed at record highs last night.
The RBA will announce its April policy decision at 2.30pm AEST. The official interest rate is not expected to change from its record low of 0.1 per cent.
This blog is not intended as financial advice