All sectors of the ASX are trading higher this afternoon following strength on Wall Street overnight and ahead of the European Central Bank’s (ECB) widely anticipated interest rate decision tonight.
The benchmark ASX 200 index index ended 1.04% higher, while the Small Ords gained 1.74%.
While all sectors are trading higher, today’s strongest performing sectors have been the Tech and Energy sectors, followed by Real Estate.
ECB poised to cut rates
The ECB is expected to cut rates by 0.25 percentage points when it meets tonight, in what would be its second cut after initiating its rate cut cycle in June.
Morningstar strategist Michael Field commented, "With 85% of economists polled expecting a 25 basis point rate cut by the ECB, it's safe to say the markets will be disappointed if this doesn’t happen.
“When expectations are so unified though, generally it’s for a reason. In fact, two reasons that we can clearly identify.
“First, the macroeconomic data that has emerged since the last ECB meeting is highly supportive of the current course of action, i.e. further rate cuts. Eurozone GDP expanded by 0.3% in Q2, not blow-out growth, but solid. Particularly when you take into account that we narrowly missed a technical recession last year.
"With half the year under our belts, economists' forecasts are pointing to growth of around 1% for the full year 2024, most definitely a step in the right direction. Next, inflation rates across Europe fell again in August; readings pointed to a 2.2% increase year over year, putting it within touching distance of the 2% targeted level."
Possibly overlooking the situation in Australia, Field added, "It now seems that the path is clear for central banks in the Western world, which only gives further backing to the ECB that the direction they set out on in cutting rates is the correct one.”
Household spending rises
The Commonwealth Bank has revealed a notable increase in household spending for August, driven by lower petrol prices and government energy bill rebates. The Household Spending Insights (HSI) Index indicated a 1.8% uptick in consumer expenditure compared to the previous month.
Spending jumped across various sectors, with rises seen for restaurants, entertainment venues, and education — which surged by 3.6% — following the payment of school and university fees. Conversely, spending on utilities and transport declined slightly (-0.3%), with government rebates on electricity and reduced fuel costs providing some relief.
CBA chief economist Stephen Halmarick said, "For the first time in August we saw the impact of the various government electricity rebates on wallets which can be seen by the decreased spending on utilities."
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