The Reserve Bank of Australia is widely tipped to raise interest rates for a fifth consecutive month when it meets this afternoon at 2.30 AEST.
What’s more, with the exception of a handful who believe the RBA is about to start softening the blows by reverting to the more typical 0.25% rise, most market watchers believe the hike will once again be in the vicinity of 0.5%.
A rate rise of that size would bring the cash rate to 2.35%, its highest level since December 2014. It’s a tough path for the central bank to walk, as it races to contain inflation and slow the economy without choking businesses and households and causing a recession.
Despite the imminent gloom, the ASX is expected to start on a positive note today. ASX futures were up 0.1% to 6,840 points early this morning.
Wall Street was on a public holiday hiatus yesterday, but there is plenty of news out of Europe.
Truss takes the reins
First up is the changing of the guard at 10 Downing Street, with Britain welcoming its third woman prime minister with the poison chalice presented by an economy in trouble, cost-of-living pressures and a looming energy crunch.
The new Tory PM is comparatively working class, and in a past life was a republican and a liberal democrat.
Those days are apparently well behind her now – the pro-tax-cuts, small government conservative is already being likened to Margaret Thatcher.
With other countries in Europe announcing generous support packages to protect their citizens from rising costs – Germany has announced around $65 billion to protect German hip pockets – it will be interesting to see if Truss can rise to this big-government moment.
Europe in the cold
European stocks fell overnight and the euro sank below 99 US cents for the first time in 20 years after Russia did what we were expecting and turned the ‘maintenance’ pause of the gas supply – which had been due to be lifted on Saturday – into an indefinite halt.
Gas prices in Europe jumped by as much as 30% at the start of yesterday’s trade and Germany’s plans to exit nuclear energy by the end of the year seemed to be in jeopardy as it looked to shore up all its power options.
The pan-European STOXX 600 index lost 0.6%, while the German Dax index fell by 2.2%. Automakers fell by 4.8% but energy stocks rose by 2.2% in response to higher oil prices.
Fears of an impending recession in Europe have now reached fever pitch.
Albo talks to miners
In the spirit of cooperation that has marked the first 100 days in office, Prime Minister Albanese addressed the Minerals Council of Australia last night to reassure miners that, rather than being in tension, clean energy and mining need each other.
The government’s planned $15 billion National Reconstruction Fund has been set up to support new and emerging industries that feature the critical minerals and resources the country needs for supply chain security as we move towards net zero.
“On any measure, Australia is the world’s pre-eminent resources jurisdiction – the top exporter of iron ore, lithium, LNG and metallurgical coal,” Albanese told the gathering.
“We are a resources superpower. We can be a renewable energy superpower. Australian metals and minerals will make this happen.
“Here – and around the world – your work will drive the global transition to a low-carbon future.
“I want to emphasise that our government will continue to work with your businesses to reduce emissions in a predictable and orderly way, underpinning the transition with certainty,” the PM said.
“In the same way, Australia will continue to be a trusted and stable supplier of energy and resources to our key trading partners.
“And as we work with other nations to reduce emissions globally, we will continue to be a reliable provider of energy.”
In other news
Base metals were mixed yesterday – aluminium and lead fell by as much as 0.6% while other metals rose. Nickel was up 4.6% and zinc and tin were up 2.2%.
Global oil prices were up by roughly 2.5% after the OPEC+ group of oil producers agreed to a small production cut of 100,000 barrels per day (0.1% of global demand), while also agreeing to meet at any time to adjust production before the next scheduled meeting on October 5.
Brent crude was up by US$2.72 or 2.9% to US$95.74 a barrel, while US Nymex crude was up by US$2.05 or 2.4% to US$88.92 a barrel.
Spot gold was trading near US$1,708 an ounce in North American trade, down from US$1,711 on Friday. Iron ore futures rose by US$3.13 or 3.3% to US$98.47 a tonne.