The S&P/ASX 200 closed higher on Tuesday, gaining 34.40 points, or 0.5%, to 7,006.00, after the Reserve Bank of Australia said it would end its bond buying stimulus program on 10 February. In a statement released after its first board meeting for 2022 the central bank said that it would not raise rates until inflation was within target. The RBA held the cash rate at a record low 0.1%, despite pressure building to move faster to tame consumer price increases.
The Australian dollar weakened from US70.72c to US70.41c after the announcement at 2.30pm AEDT and the ASX 200 jumped higher, up 0.8%.
In its statement, the RBA said that the Omicron outbreak has affected the economy, but it has not derailed the economic recovery, but admitted that the main source of uncertainty continues to be the pandemic.
Inflation has picked up more quickly than the RBA had expected, but remains lower than in many other countries, but ceasing purchases under the bond purchase program does not imply a near-term increase in interest rates, it said.
“As the Board has stated previously, it will not increase the cash rate until actual inflation is sustainably within the 2 to 3% target range. While inflation has picked up, it is too early to conclude that it is sustainably within the target band,” it said, adding, the board was “prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve”.
Australian shoppers scaled back spending in December, with retail trade coming in 4.4% lower than in November. It was the largest monthly decline since the national lockdown of 2020, and compared with a 7.3% jump in November and 4.9% in October, seasonally adjusted figures from the Australian Bureau of Statistics showed.
The S&P/ASX 200 dropped by more than 8% in January, as global stocks fell, with the focus on inflation, omicron supply chain disruption, and central banks’ monetary policy. The Australian dollar weakened to below US70c as the US dollar gained in strength on a more hawkish stance from the US Federal Reserve. Technology stocks on the ASX were hit hard, the S&P ASX All Technology index down more than 17% for the month. The unification of BHP shares raised it from a 6% weighting of the index to around 10% and shares were up more than 9% in January. Miner Rio Tinto also gained by almost 12% for the month.
China is celebrating Lunar New Year holiday this week. Markets there are closed for the five-day event.
The Aussie dollar is at US70.66c against the US dollar.
Bitcoin is at $US38,490.
Gold is at $US1800.72 an ounce.
Brent crude oil is trading around $US90.21 a barrel.
WTI crude oil is at $US88.91 a barrel.
Disclaimer: CMC Markets is an order execution-only service. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.