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

 

Superu Report: Land Regulation Drives Auckland House Prices

Land use regulation is responsible for up to 56 per cent of the cost of an average house in Auckland according to a new research report quantifying the impact of land use regulations, Finance Minister Steven Joyce says. More>>

ALSO:

Fletcher Whittled: Fletcher Dumps Adamson In Face Of Dissatisfaction

Fletcher Building has taken the unusual step of dumping its chief executive, Mark Adamson, as the company slashed its full-year earnings guidance and flagged an impairment against Australian assets. More>>

ALSO:

No More Dog Docking: New Animal Welfare Regulations Progressed

“These 46 regulations include stock transport, farm husbandry, companion and working animals, pigs, layer hens and the way animals are accounted for in research, testing and teaching.” More>>

ALSO:

Employment: Most Kiwifruit Contractors Breaking Law

A Labour Inspectorate operation targeting the kiwifruit industry in Bay of Plenty has found the majority of labour hire contractors are breaching their obligations as employers. More>>

ALSO:

'Work Experience': Welfare Group Opposes The Warehouse Workfare

“This programme is about exploiting unemployed youth, not teaching them skills. The government are subsidising the Warehouse in the name of reducing benefit dependency,” says Vanessa Cole, spokesperson for Auckland Action Against Poverty. More>>

ALSO:

Internet Taxes: Labour To Target $600M In Unpaid Taxes From Multinationals

The Labour Party would target multinationals operating in New Zealand to ensure they don't avoid paying tax if it wins power and is targeting $600 million over three years through a "diverted profits tax," says leader Andrew Little. More>>

ALSO: