Hard times ahead for Aussies as inflation saps confidence

The S&P/ASX 200 was up 1.3% by the close, driven higher by gains in the Materials and Energy sectors. The NZX 50 closed 1.3% higher.

Australians’ living standards are set to drop over the next 12 months, constraining the Reserve Bank’s tightening cycle when it begins raising interest rates as soon as Tuesday, according to Barrenjoey Markets, reports Bloomberg.

Australia’s $2.2 trillion economy is powering ahead and closing in on full employment, while inflation has accelerated to the fastest pace in 21 years. Yet sentiment among households, carrying $2.5 trillion of mortgage debt, is slipping in expectation of higher borrowing costs and price rises, says Bloomberg.

Traders are pricing in a 15-basis point hike to 0.25% at the May 3 policy meeting; rates are then seen climbing to 2% in October and 3.2% in April 2023.

On Thursday, Coles Group said its third-quarter revenue rose 3.6% to $9.1 billion – underpinned by its supermarkets – as the omicron variant sparked a spike in demand for groceries in January, and food inflation started to come through.

Coles Group boss Steven Cain did not provide any sales or earnings guidance for the full 2022 year but noted price increases are in the pipeline as Coles remains in talks with many suppliers battling increased input costs ranging from soft commodities to higher freight and logistics, according to afr.com.

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US futures are gaining and Asia markets are mixed, with Japan leading gainers after the Bank of Japan sparked a sharp slide in the yen by doubling down on its promise to defend a rock-bottom yield target that leaves it as a dovish outlier as other major central banks move to tighten monetary policies, reported Bloomberg.

The central bank said it would buy an unlimited amount of bonds at fixed-rates every business day to protect a 0.25% ceiling on 10-year government debt yields as part of its stimulus measures.The currency weakened sharply against the dollar after the decision, briefly hitting 129.87 per dollar from around 128.67 immediately beforehand.

CMC Markets APAC & Canada Markets Analyst Azeem Sheriff has provided technical analysis:

This is not investing advice and should be read as general information.