The first trading day of the month marked the sixth consecutive daily lift for the ASX200, carried higher by a rising crude oil price and market hopes that the RBA will choose to pause interest rate hikes for the first time since May last year.
OPEC cutting 1 million barrels per day of crude production drove the crude price up 6.5% to more than US$80 per barrel, on top of a 9.25% hike last week.
“Yesterday’s rebound in crude oil stalled ahead of the band of resistance we noted in the US$82/83.00 region,” IG market analyst Tony Sycamore wrote in the Traders View report.
“This area is critical for the future direction of crude oil. Should crude oil see a sustained gain above US$83.00, it would open the way for the rally to extend into the mid-US$ 90s.
“Conversely, should crude oil remain below resistance at US$82/83, allow for further sideways price action between US$83.00 and US$70.00ish.”
Will the RBA pause hikes?
The sentiment is mixed on whether the RBA will pause rate increases today – while the interest rate market seems confident the rate will not lift again after today’s meeting, forecast analysts are split down the middle.
“The forecasting community is divided and notes that while the data is slowing, it remains elevated. It would be premature for the RBA to pause its rate-hiking cycle and its fight against inflation is not yet won,” Sycamore said.
“In our opinion, tipping the balance in favour of a pause is the uncertainty of March's banking crisis, which will see credit conditions continue to tighten and in turn, will play a part in containing demand and inflation.
“Notably, the interest rate market has called the RBA rate hiking cycle much better than the forecasters and due to this, we believe the RBA will keep interest rates on hold at 3.6% and note that future moves depend on the incoming data.”
T. Rowe Price associate portfolio manager Scott Solomon agrees, stating:
“We expect the Reserve Bank of Australia (RBA) to pause at the April meeting as it assesses the outlook for the economy and the feed-through of monetary tightening, however, the committee is likely to remain data dependent and we expect a final 25 basis points hike in May.”
The RBA will announce its decision at about 2:30pm AEST today.
US and European markets
Both European and US markets were mixed overnight according to Commsec, as OPEC’s production cuts stoked fears of continued inflation.
Oil, gas and energy stocks were unsurprisingly the winners, up 4% in European markets as in the US Chevron (NYSE:CVX) (+4.2), Exxon Mobil (NYSE:XOM) (+5.9%) and Marathon Oil (NYSE:MRO) (+9.9%) gained.
In Europe, financial stocks fell 1.4% after Switzerland’s Federal Prosecutor began an investigation into the state-backed takeover of Credit Suisse (SIX:CSGN) (-2.4%) by UBS (-2.9%).
Gains in energy and losses in financials cancelled each other out for the FTSEurofirst 300, which was mostly unchanged, but the UK FTSE 100 gained 0.5% on the back of British oil and gas company wins.
For the US, the Dow rose 1% or 327 points and the S&P500 lifted 0.4%, but the Nasdaq was dragged 0.3% or 32.5 points lower by a languishing Tesla (NASDAQ:TSLA) stock, which shed 6.1% after March quarter deliveries were revealed to have risen only 4% from the quarter previous.
In other news:
- Copper futures fell 1.1%
- Aluminium futures slipped 0.2%
- Gold futures rose 0.7$ or US$14.20 to US2,000.40 an ounce
- Spot gold was trading near US$1,983 an ounce at close
- Iron ore futures fell 3.8% or US$4.87 to US$122.19 a tonne