Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Cautious tone expected leading into RBA decision

10.05 AEDT, Tuesday 4 December 2012


Cautious tone expected leading into RBA decision


By Ric Spooner (Chief Market Analyst, CMC Markets)


The unexpected sub 50 read on the US manufacturing index is likely to set a softer tone in early trade today as investors wait on the outcome of the RBA meeting.

The weaker than expected US manufacturing index followed softer Australian data yesterday in the form of retail sales and company profits. These figures serve to remind investors that the growth outlook is at best moderate as economies sail into the 2013 headwinds of fiscal drag and in, Australia’s case, lower mining investment activity.

Building approval statistics due this morning will provide a final read on the state of the economy prior to the RBA meeting. A lower print today for October would still be consistent with trend growth since late last year given that it follows strong increases in the previous 2 months. While approvals have picked up since earlier in the year, the RBA will be looking for the housing sector to do better than recent levels to take up some of the slack anticipated from lower mining investment.

The risk for short term traders today is skewed to the downside if the RBA fails to cut rates. Today’s decision comes after a strong rally since mid-November. This leaves the market vulnerable to a sell off if it the news is disappointing. The consumer discretionary sector has performed strongly since mid-November, but could come under pressure if rates are not cut. Yesterday’s retail sales figure indicates ongoing consumer caution and investors are likely to be nervous about this sector if rates are not cut.

If rates are cut today there is likely to be investor support for relatively high yielding stocks with a defensive earnings stream as the incentive to switch out of cash and fixed interest investments grows. While consumer discretionary and industrial stocks will be assisted by a rate cut, the impact of lower interest rates on spending is likely to be moderate given household focus on balance sheet repair.



© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Bad Day For Rope: Donaghys Job Losses Another Blow To Dunedin

The loss of 30 jobs from Donaghys rope and twine factory is yet another blow to the people and economy of Dunedin, says Dunedin South Labour MP Clare Curran. More>>

ALSO:

Oil: 2014 New Zealand Petroleum Summit

Simon Bridges: Our abundance of energy and minerals resources provides us with unique opportunities to build the New Zealand economy.

Over the past three years the Government has made significant changes to how the sector is regulated. More>>

ALSO:

WWF Report: Solutions In Reach; World Biodiversity Suffers Major Decline

Global wildlife populations have declined by more than half in just 40 years as measured in WWF's Living Planet Report 2014. Wildlife's continued decline highlights the need for sustainable solutions to heal the planet... More>>

ALSO:

Scoop Business: NZ Dollar Catches Breath After "Goldilocks" Slump

The New Zealand dollar edged up following its dramatic slump yesterday after the Reserve Bank confirmed speculation it intervened in the currency market last month and PM John Key suggested a “Goldilocks” level far lower than at present. More>>

ALSO:

Biosecurity: Kiwifruit Claim To Hold Officials Accountable For Psa

Kiwifruit growers have joined forces to hold Biosecurity NZ accountable in the courts for its negligence in allowing 2010’s Psa outbreak that devastated New Zealand’s kiwifruit industry and exports. Foundation claimants representing well ... More>>

ALSO:

Poison: Anglers Advised Not To Eat Trout In 1080 Areas

With the fishing season opening in just a few days (1 October 2014), anglers are being warned by the Department of Conservation(DOC) not to eat trout from pristine backcountry waters and their downstream catchments, where the department is conducting 1080 poisoning operations. More>>.

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news