The ASX is likely to start the week on a downward trend. ASX200 futures are down 13 points, or 0.2%, to 7,659 points on Monday morning.
Markets will be holding their breath ahead of tomorrow’s Reserve Bank of Australia (RBA) meeting. The RBA is expected to keep rates on hold amid warnings about a "two-way risk" to the economy.
The official cash is currently 4.35% and the central bank has not ruled out a further rate rise with annual consumer price inflation currently at 4.1%, above the target range of between 2-3%.
Former RBA governor Philip Lowe warned of the effects of two-way risk last week saying, “Things can often turn out different to what you expect, so the bank (RBA) was right to remind us that there is still two-way risk on interest rates in Australia even though markets are pricing in cuts.”
Last week, the ASX200 finished 2.25% lower at 7,670 for its heaviest weekly fall since September. Losses in the big iron ore mining stocks as the price of iron ore fell towards $100 were the main drags. The losses saw a local broker downgrade three of the four big Australian banks.
Materials (-3.36%) and Financial (-3.17%) sectors were the biggest losers, with the Industrials (-2.69%) and Telcos (-2.12%) also feeling the heat. The Utilities (+1.21%) and Real Estate (+0.77%) sectors were the only two sectors to close in positive territory.
Affecting the markets this week will be the aforementioned RBA interest rate decision, followed by jobs data on Thursday, and the RBA’s Financial Stability Review on Friday.
What happened in the US?
US equity markets also finished the week in the red, held back by firm inflation data and surging bond yields.
- For the week, the Nasdaq lost 1.17%.
- The S&P500 lost 0.13%.
- The Dow Jones lost 8 points (-0.02%).
“Ahead of this week’s FOMC meeting, the risks are the Fed's median dot will show just two rate cuts in 2024, down from the three cuts projected in December,” IG Markets analyst Tony Sycamore said. “The rates market is pricing in 71bp of cuts, the lowest since October 2023. A rate cut at the June FOMC meeting is now a coin flip.
“Before we can conclusively determine if last week marked a significant shift in sentiment across equity markets, there needs to be some allowance for Nvidia to again ride to the rescue. As a reminder, Nvidia’s GTC conference, which features CEO Jensen Huang as the keynote speaker and has historically been used to unveil new product developments, takes place this Monday, March 18.”
In Europe
European sharemarkets dipped on Friday as risk sentiment remained subdued due to mounting concerns the US central bank may delay interest rate cuts. The rate-sensitive real estate index led losses with a 2% decline.
Vonovia plunged 10.6% after Germany's largest landlord reported its biggest loss ever in 2023 following further writedowns on the values of its properties.
- The continent-wide FTSEurofirst 300 index fell by 0.4% but was up 0.3% for the week.
- In London, the UK FTSE 100 index slid 0.2% but rose 0.9% over the week.
Currencies and commodities
(source Commsec)
Currencies
Were mixed against the US dollar in European and US trade.
- The Euro rose from US$1.0872 to US$1.0899 and was near US$1.0885 at the US close.
- The Aussie dollar firmed from US65.51 cents to US65.73 cents and was near US65.60 cents at the US close.
- The Japanese yen fell from 148.05 yen per US dollar to JPY149.15 and was near JPY149.00 at the US close.
Commodities
Global oil prices eased on Friday, a day after topping US$85 a barrel for the first time since November, but prices jumped over the week on rising demand from US refiners completing planned overhauls.
- The Brent crude price slid US8 cents or 0.1% to US$85.34 a barrel.
- The US Nymex crude price dipped US22 cents or 0.3% to US$81.04 a barrel. Both the Brent and Nymex prices rose about 4% over the week.
Base metal prices climbed on Friday.
- Copper futures jumped 1.9% to an 11-month high propelled higher by fund buying.
- Aluminium futures added 1%. For the week, copped soared 5.9% and aluminium rose 0.9%.9
On the small cap front
The S&P/ASX Small Ordinaries (XSO) finished Friday 0.48% to the red. It lost 1.29% for the week.
It’s a slow start on the news front today. You can read about the following and more throughout the day.