Originally published by Rivkin Securities
The S&P 500 was driven higher overnight lead by financials and energy as the oil price continued its rally. WTI oil closed above $47 per barrel to make a one-month high as US drilling activity declined for the first time in 24 weeks, helping to push energy stocks higher. In addition, the ISM manufacturing PMI data came out stronger than expected indicating that purchasing of raw materials in the manufacturing sector is expanding. The S&P 500 closed up just 0.23% after being up 0.6% earlier in the session. The US stock markets had a shortened session, closing at 1:00pm (US time) in advance of the July 4 holiday.
With the Reserve Bank of Australia (RBA) today set to make its interest rate decision, it is worthwhile to look at central bank policy rates for some of the major global markets.
Market forecasts are indicating that Canada is expected to raise interest rates by 25 basis points at its next central bank meeting which would put both Canada and the US in a tightening cycle. As a resources heavy economy with a strong property market, Canada’s economy is quite similar to our own and it is therefore likely the RBA will be watching closely what happens in the Canadian economy as it raises rates. Despite the recent interest rate increases in the US, and the forecast increase in Canada, the real interest rate in all of the major developed markets is still negative as a result of the inflation rate running higher than the interest rate. With a very negative real rate of interest the Bank of England is also starting to shift its stance toward rate hikes in the not-so-distant future.
The RBA is not expected to change rates at this policy meeting however some investors expect the tone of the statement to lean more towards future hikes rather than further cuts.
Data releases:
- Australia Retail Sales 11:30am AEST
- RBA Cash Rate Decision 02:30pm AEST