The ASX 200 slid to six month lows today, down 1.19% at 6,950 just before market close with all sectors down except Health Care.
Energy stockswere leading the losses, falling 3.64% with Woodside Energy down 3.5%, Santos down 4.1, while Karoon Energy lost 4.1%.
Rising bond yields overnight, after hawkish comments from the Fed, were behind much of the local pain today. At 4.7%, US 10-year Treasury yields — used to price assets the world over — are at their highest level since 2007.
Rates on hold for a fourth month
The major news today was the RBA’s decision to maintain the cash rate at 4.10% for the fourth straight month, although it cautioned that inflation was still too high and further tightening may be required. The decision did little to improve today’s market sentiment, with the benchmark failing to recover any real ground after the morning’s drop.
CreditorWatch chief economist Anneke Thompson commented on the decision:
“Continuing weak retail trade and consumer confidence data is giving the board the clear sign that their efforts to reduce demand in the economy have worked very well. While some items in the CPI ‘basket’ continue to record price rises, these rises are by and large not related to high consumer demand, and therefore not enough to convince the RBA to move again to cool demand further.
“All groups monthly CPI rose 5.2% over the year to August, up from 4.9% the month prior. Whilst a higher figure is not welcome news for the RBA, the figure is heavily impacted by the higher cost of fuel this month. Excluding volatile items like fuel, holiday travel and fruit and vegetable items, monthly CPI increased 5.5%, down from 5.8% the month prior.
“The unemployment rate is still very tight, at 3.7%, and almost 65,000 people gained employment over August. Business confidence in all sectors except Retail Trade is also relatively healthy.
“However, quarterly Job Vacancy data released in late September showed that job vacancies are now falling well off their post-Covid peaks, and this should result in the unemployment rate creeping up over the next few months.
“The economy appears to be maintaining a steady slowdown, and thus far business activity is not falling precipitously. However, CreditorWatch BRI data from August 2023 does show a significant fall in the average value of invoices since their peaks in late 2019. The slowdown has been more apparent since the start of 2023, and does indicate that monetary policy tightening is impacting the SME sector already.
Kate Browne, head of research at Compare Club said, “Today’s decision to leave the cash rate at 4.1% is a small reprieve for millions of homeowners this month. However this pause isn’t much consolation as the average mortgage holder has seen an annual increase of over $15,700 on their repayments since April 2022.
“Last week’s jump in inflation has fortunately not resulted in a rate hike but it’s certainly increased the chances of another one before the end of the year. All the more reason for homeowners to look at making savings where they can on their household expenses ahead of the Christmas period.
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