The ASX 200 opened the day strongly, gaining 47 points as of 11 AM AEST time before sliding to a negligible 3.2 point (0.04%) gain to 7,326.90.
While the index didn’t make much progress today, it is on a good trajectory, having gained 1.10% in the last five days and sitting just 3.18% off its 52-week high.
The market was held up by modest gains in the Financials (+0.38%) and Info Tech (0.48%) sectors, with Materials and Industrials in the green but mostly flat, Health Care down a more significant -0.36% dip and the other sectors shedding between -0.14% and -0.29%.
Commodities weighed heavily on the market, down across the board but for a small 0.32% uptick in silver; palladium, platinum, aluminium and tin were all down more than 1%, while zinc, gold and copper were mostly flat.
A higher-than-expected employment rate took the wind out of the ASX’s sails today, as Proactive explored in this article on the ABS data.
IG Markets analyst Tony Sycamore is betting the job numbers will push the RBA closer toward another potential rate hike on concern sparked by a tight labour market and potentially sticky inflation.
“Earlier this week, the RBA meeting minutes from July put the focus firmly on incoming data, including today’s labour data and next Wednesday’s inflation data, ahead of the RBA’s August Board meeting,” Sycamore wrote.
“The hotter-than-expected jobs numbers, which has the unemployment rate edging back towards a 50-year low, despite 400 basis point (bp) or rate hikes from the RBA, leave no room whatsoever for an upside surprise in next Wednesday's Q2 CPI data.
“More so given the RBA’s stated concerns around wage growth and inflation.
“The expectations ahead of Wednesday’s inflation numbers are for headline inflation to fall to 6.2% year-on-year (YoY) from 7%.
“The RBA's preferred measure of core inflation, the Trimmed Mean, is expected to fall to 6.2% YoY from 6.6% previously.
“Presuming the inflation numbers come in as expected, it likely supports the idea of a follow-up pause in August.
“However, if next week’s headline inflation comes in at 6.4% or higher, brace for another rate hike as the RBA is forced to respond to a tight labour market and sticky inflation.
“The probability of a 25 bp rate hike from the RBA in August has risen to about 40%, with a full rate hike now priced by October.
“The AUD/USD reacted quickly as it surged from .6800 cents to a high of .6833 cents.
“The ASX200, which was testing three-month range highs prior to the data, has fallen 40 points from 7,383 to 7,339.”
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