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ASX higher after RBA holds cash rate

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The S&P/ASX 200 climbed after the Reserve Bank held the cash rate steady at its final meeting for the year. The Australian dollar is stronger against the US dollar, sitting around US70.76c compared with US70.59c in early afternoon trade.

The benchmark index closed up on Tuesday, gaining 68.80 points or 0.95% to 7,313.90. US futures are gaining.

The Reserve Bank of Australia board held the official cash rate at a record low 0.1% after meeting for the final time for 2021. The board does not meet in January but meets again in February. It noted the new omicron covid variant is “a new source of uncertainty”.

It said it would continue to buy $4bn a week of government securities until at least mid February 2022 and would consider its purchasing program at its February meeting.

Record high property prices across Australia has pushed the number of mortgage applicants taking on risky debt to unprecedented levels.

The Australian Prudential Regulation Authority's latest quarterly ADI property exposure report for September shows 23.8% of new lending in the quarter had a debt-to-income ratio of six times or more, in dollar terms.

A year ago, just 16.3% of new loans had debt-to-income ratios at this level. Debt-to-income ratios of six and over are considered risky by APRA.

The average home price costs $1.12m in NSW, $940k in the ACT and $921k in Victoria, according to Australian Bureau of Statistics data

Oil Search proxy votes overwhelmingly backed a $21bn merger with Santos, creating a top 20 listed ASX company and one of the 20 biggest oil and gas companies in the world.

Santos will own 61.5 per cent of the merged company to Oil Search’s 38.5 per cent, a boost for Oil Search to the previous 63-37 per cent weighting between the two which was rejected by its board. Santos was up 2.3% and Oil Search was 3.8% higher.

Zip managing director Larry Diamond says a record November shows the tremendous growth BNPL is having, particularly in the past year.

The growing popularity of buy now pay later products combined with Black Friday sales has seen Zip report a record 86 per cent year-on-year increase in transactions during November. Shares were up +9% and Afterpay was more than 2% higher.

Shares dropped more than 6% intraday following Monday’s after hours announcement that chief executive of Magellan Financial Group, Brett Cairns, has resigned from the $116 billion fund manager citing only "personal reasons" for his departure after 14 years with the group.

Bitcoin climbed back above $US50,000 after slumping as much as 22% on Saturday. Bloomberg reports that technical analysts say the next key level to watch, should it start to rally, would be its average price over the past 100 days. Still, any selloff could see support at the 200-day average price around $46,300 followed by $40,000. 

The VIX remains around 27 indicating further volatility based on S&P 500 index options.


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