The ASX hit seven-week highs before falling in the afternoon session.
The S&P/ASX200 gained 66.20 points or 0.98% to 6,851.90, crossing above its 125-day moving average. Over the last five days, the index has gained 1.07%, but is down 7.96% for the last year to date.
Top-performing stocks in this index are Home Consortium Ltd and Graincorp Ltd up 8.09% and 7.73% respectively.
Of the sectors, only Energy was in the red down 0.69%, while Information Technology and Consumer Discretionary were the biggest movers up 2.36% and 2.30% respectively.
All eyes this week will be on cash rate moves as the Reserve Bank of Australia (RBA), Bank of England (BoE), the Fed and European Central Bank (ECB) all meet.
In Australia, a 25bp hike is expected, but a 50bp hike isn’t out of the question after CPI data blew out last week.
A 75 bps hike is expected by the BOE on Wednesday, the same as is expected by the Fed and the ECB.
In the news today
Retail sales figures could push the rate higher than expected
The 0.6% month-on-month retail spending rise in September was slightly better than expected, with gains due to higher prices rather than volume spending.
Retail sales rose from August to a record A$35.1 billion ($22.48 billion).
Data from the Australian Bureau of Statistics (ABS) show food, clothing and eating out as being surprisingly resilient in the face of surging inflation and higher interest rates.
"Many retailers remained open for the National Day of Mourning, an additional one-off public holiday in September, and this boosted spending on food, alcohol and dining out," said Ben Dorber, head of retail statistics at the ABS, referring to a holiday to mark the passing of Queen Elizabeth.
Analysts are predicting a 0.25% rise when the RBA meets tomorrow, but it could go as high as 0.50% based on today’s retail numbers.
However, the full effect of past rate rises is yet to show on the economy and it is expected the RBA to stay the more conservative course.
"The optics of dropping the pace of tightening in October and then stepping it up the following month would not look good," said Gareth Aird, head of Australian economics at CBA. "And such a decision would send a very confusing message to households and businesses."
Westpac believes today’s data points to “rate rises starting to impact".
Nominal sales rose 2.3% in the September quarter, "a solid result but a step-down from Q2’s strong 3.2”, Westpac senior economist Matthew Hassan said.
"As we now know from the Q3 CPI, prices accounted for the bulk of the increase in the quarter, retail prices likely up around 2% on-quarter.
"Friday’s detailed final retail release will include official Q3 estimates of real sales that will show a much more subdued gain in volume terms.
"While price effects are difficult to disentangle, the detail does suggest there may be a rate rise effect coming through over and above the direct ‘eroding’ effect of higher prices.
"The slowing in household goods retail – barely up 0.3% for Q3 as a whole – and more subdued sales in NSW and Victoria both suggest a degree of interest rate sensitivity."
CommSec chief economist Craig James pointed to growing evidence consumers were trimming spending.
"In nominal and real terms, spending at department stores and household goods retailers probably fell in September," James said.
"At the same time, inflation pressures are easing. Latest data confirms our belief that the Reserve Bank will lift rates by just 25 basis points tomorrow."
Financial commentator Peter Switzer disagrees.
“I don’t want him (Governor Philip Lowe) to do it, but I’ve got a suspicion he might think, ‘one big hit’,” Switzer told Sky News.
“They need to scare the Aussie consumer. That 7.3% number was bigger than expected. He could easily go for the 0.5%.”
So, what will the RBA do?
Scott Solomon, associate portfolio manager of T. Rowe Price’s Dynamic Global Bond Strategy said: “We expect the Reserve Bank of Australia (RBA) to stick to the plan and hike 25 basis points (bps) at the November meeting.
"The recent hot CPI print does increase the risk of an upside surprise but, in reality, a move to 50bps would mean a sharp U-turn in thinking from the RBA.
“Governor Lowe is intent on allowing effects from prior hikes to flow through to main street. He’s acutely aware that many mortgages are due to reset over the next couple of months and doesn’t want to unnecessarily burden the population.
“Furthermore, he’s quite proud of the levels of employment reached by the Australian economy and has zero desire to prematurely destroy that.
“I expect the market to focus attention on the updated economic projections that will be released a couple of days post the RBA’s decision.”
What’s next for the Aussie market
“October has been a good month for the All Ordinaries Index with our market up over 5% so far,” writes Wealth Within founder and chief analyst Dale Gillham.
“While on the surface this rise may seem very good, it only occurred in the first few days of this month. Since then, we’ve experienced large swings both up and down as the market sentiment has continued to be indecisive as if it’s waiting for news to pick a direction.
“Last week the market traded up early on all four days only to close well off the high for the day, indicating the indecision is still very present. It’s like day traders are locking in profits near the end of the day because they lack the knowledge and/or confidence as to what the market will do the next day.
“The bulls have moved the market up to its highest point in over a month and it seems they are slowly gaining traction. Unless the market closes way down on Friday, I expect it will move higher into next week. If this occurs, the probability of a sustained rise over the coming months is much higher.
“While I don’t like to be a doomsayer, we still need to exercise caution as the market has been prone to do the unexpected over the past couple of years. As such, we still need to assume that the low of 6,581 points from June may be challenged.”
Five at five
NickelSearch expands high-priority nickel sulphide targets at Carlingup in September quarter
NickelSearch Ltd (ASX:NIS) recently started reverse circulation (RC) drilling to test a selection of well-defined nickel sulphide targets at RAV8, Sexton and Javelin.
Read more
Skyfii delivers busy September quarter powered by new contract wins
Skyfii Ltd (ASX:SKF, OTC:SFIIF) kicked off the new financial year in a strong position with a growing pipeline of new business opportunities.
Read more
Aurumin boosts total Sandstone resource to 946,000 ounces at 1.5 g/t gold
“The next drill program at Sandstone will focus on the current geochemical and structural targets, with plans and programs of work currently being finalised, to further advance the new targets that we have," said Aurumin Ltd (ASX:AUN) MD Brad Valiukas.
Read more
Golden Rim Resources to be led by new CEO
Tim Strong will take over as Golden Rim Resources Ltd (ASX:GMR) CEO on November 1, replacing Craig McKay.
Read more
Imugene reaches new dosing milestone in Phase 1 VAXINIA trial
“The VAXINIA trial continues to progress on schedule and we’re very excited to see the results it can deliver for these patients dealing with significant tumour growth,” said Imugene Ltd (ASX:IMU, OTC:IUGNF) MD and CEO Leslie Chong.
Read more
On your six
INTERPOL enters the metaverse
The global police organisation has unveiled the first-ever Metaverse specifically designed for law enforcement worldwide.
Read more
The one to watch
Ionic Rare Earths pleased with maiden ESG rating
Ionic Rare Earths Ltd (ASX:IXR, OTC:IXRRF) managing director Tim Harrison speaks with Proactive’s Andrew Scott about how the company secured an overall environmental, social and governance (ESG) rating of ‘BB’ from Digbee ESG.
Watch