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

 

Scoop Business: RBNZ Keeps OCR At 3.5%, Signals Slower Pace Of Future Hikes

Reserve Bank governor Graeme Wheeler kept the official cash rate at 3.5 percent and signalled he won’t be as aggressive with future rate hikes as previously thought as inflation remains tamer than expected. The kiwi dollar fell to a seven-month low. More>>

ALSO:

Weather: Dry Spells Take Hold In South Island

Many areas in the South Island are tracking towards record dry spells as relatively warm, dry weather that began in mid-August continues... for some South Island places, the current period of fine weather is quite rare. More>>

ALSO:

Scoop Business: Productivity Commission To Look At Housing Land Supply

The Productivity Commission is to expand on its housing affordability report with an investigation into improving land supply and development capacity, particularly in areas with strong population growth. More>>

ALSO:

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. 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