The ASX is down today after a disappointing update from China about its economic targets.
While China’s top economic planner Zheng Shanjie, head of the National Development and Reform Commission (NDRC), is “fully confident” the country will hit its economic growth targets for the year, investors wanted more about its economy-boosting policies.
“We are fully confident in achieving the goals of economic and societal development for the year. We are also fully confident in maintaining stable, healthy and sustainable development,” Zheng said.
“Overall, when we look at the current development and the development forecast, the fundamentals of our country’s economic development have not changed,” Zheng said Tuesday. “With the continued release of various policies, particularly incremental packages, market expectations have recently significantly improved,” he added.
The S&P/ASX200 dropped 22.60 points or 0.28% to 8,182.80. The index has lost 0.32% for the last five days, but sits 1.24%below its 52-week high.
Bottom-performing stocks in this index are Fortescue Ltd (ASX:FMG) and Mineral Resources Ltd (ASX:MIN), down 5.38% and 5.02% respectively.
Looking at the sectors, only Health Care and Financials made ground, lifting 0.77% and 0.26% respectively. Materials was the worst performed losing 1.59%, while Information technology dropped 1.19%.
On the small cap front, the S&P/ASX Small Ordinaries (XSO) lost 0.62% today to 3,125.70. Over the past five days, it is down 0.48%.
RBA keeps rate hikes on the table
The Reserve Bank of Australia (RBA) has maintained its stance on inflation, signalling that future interest rate hikes are still possible despite not considering the option during its most recent meeting.
RBA September meeting minutes, released today, reveal that the board chose to hold the cash rate at 4.35%. However, the minutes noted that future rate adjustments could be made if household consumption picked up strongly due to the stage three tax cuts, the jobs market proved more resilient or the economy’s supply constraints were greater than anticipated.
“In this case, the cash rate might need to be noticeably higher than the market path underpinning the August forecasts in order to bring inflation sustainably back to target by 2026,” the minutes read.
Alternatively, if the economy weakens more than expected causing a sharper reduction in inflation, a rate cut could be necessary.
“This could occur if households saved a significantly larger proportion of their incomes than currently assumed … It could also occur if the labour market weakened more sharply than forecast.”
The RBA reiterated that rate decisions would not be influenced by global central banks, as Australia’s economic conditions differed.
“While it was important to take account of economic developments abroad, it was not necessary for the cash rate target to evolve in line with policy rates in other economies since Australian inflation was higher, the labour market stronger and monetary policy less restrictive than in many other advanced economies,” the minutes read.
Despite a fall in headline inflation to 2.7% in August, core inflation remains high at 3.4%. Resilient retail spending and employment have also underscored the economy's continued strength.
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