The Australian share market saw a reversal of recent gains after a statement from the Reserve Bank of Australia (RBA).
The statement said that inflation is likely to remain at 3.5 per cent for longer than expected, with previous forecasts expecting it to drop to 3.25 per cent by the end of 2024. This statement means that many struggling households will not be getting much-needed relief from high repayments.
Gareth Aird, Chief Economist for the Commonwealth Bank went on to say that the board would rather not raise rates if they can avoid it, but might be left with no choice. Mr. Aird went on to point out that the decision will be made on the economic data as it comes in, and how it compares to their forecasts.
Not only did domestic news hit the Australian stock market, but news from abroad also added further pressure. The markets in Australia reacted negatively to news that Jerome Powell, Head of the US Federal Reserve, admitted there’s a strong possibility that rates in the US could rise again this cycle. The news serves as a stark reminder the economy has not fully recovered from COVID and that pressures on the market remain.
The S & P/ASX200 fell 0.6 per cent, closing the day’s trading at 6,976.5 points. All sectors on the index saw falls overall, with banks and energy companies being among the worst hit. By the end of the day’s trading, the Australian Dollar was down 0.1 per cent against the USD, standing at 63.62c.
Banking stocks fell by 0.69 per cent overall, with the Australia and New Zealand Banking Group (ANZ) and Westpac each losing 1.3 per cent. National Australia Bank (NAB) was among the biggest losers, falling by 1.7 per cent.
Energy stocks were hit even harder, losing 4 per cent overall. The key reason for this is the tense situation in the Middle East which has put upward pressure on oil prices. West Texas Intermediate oil is getting closer to 76 USD per barrel, while Brent crude is trading close to 80.50 USD. Other big losers for the day were News Corp-owned REA Group, which lost 2.1 per cent despite
Mining Company Mineral Resources also saw a significant loss of 2.6 per cent, although this was driven by different factors. These factors include the company’s investment in securing rights to resources for a project in Western Australia.
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