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The share market largely overcame initial weakness as growth stocks rebounded ahead of this afternoon’s Reserve Bank rates announcement.  

The S&P/ASX 200 trimmed an early loss of 33.5 points to six points or less than 0.1 per cent at mid-session.

The tech sector rebounded 1.6 per cent from an eight-week low. Positive trading updates lifted CSL, Woolworths, Breville and Domain Holdings.

What’s driving the market

The market edged back towards neutral mid-morning ahead of an RBA announcement expected to reset monetary policy expectations for the rest of the year. The bank’s board met this morning and was due to update the market at 2.30 pm AEST. The dollar rallied 0.7 per cent to 70.96 US cents ahead of the decision.

While a majority of economists expect the RBA to raise rates by 15 basis points from a record-low 0.1 per cent, this afternoon’s announcement is “not quite a slam-dunk”, according to NAB’s Head of FX Strategy, Ray Attrill.

“In the latest Bloomberg poll, 19 of 29 analysts expect a 15bps rise, but 5 others expect no change today and 5 expect an immediate 40bps increase to 50bps,” Attrill said.

Peter Esho, co-founder of property investment  platform Wealthi, thinks the bank has no choice but to raise today.

“It’s not a borderline call, it’s a necessary move from a crazy low level,” he said. “Bottom line: Rates are rising, but the extent of the rises will be capped by global growth concerns. We’re moving from ultra-low to low,” he added.

The chief investment officer at Atrium, Tony Edwards, believes investors face a new era of volatility as the RBA battles inflation at levels rarely seen in the last 30 years.

“This regime will likely be characterised by more macro-economic and asset price volatility and steeper/more prolonged drawdowns in asset prices. It will be a regime where beneficiaries of ever lower interest rates will suffer. Think leveraged residential real estate and profitless tech companies,” he said.

“Tactically capturing oscillating moves in currencies, commodities and equities to contribute positive absolute returns will be invaluable in constructing multi-asset portfolios.” 

The effect of surging prices on consumer confidence was underlined by a sharp deterioration in the ANZ-Roy Morgan gauge last week. Sentiment slumped 6 per cent to 90.7, its lowest level since 2020. Home-owners with mortgages were especially anxious.

“The strong inflation result of 5.1 per cent was likely the prime driver of the drop in confidence as it increases the prospect of interest rate hikes by the RBA in the near future,” David Plank, ANZ head of Australian economics, said.

“This is supported by the fact confidence dropped by 9.6 per cent amongst people paying off their home loan, while for people who already own their home or are renting confidence dropped by 4.7 per cent and 4.2 per cent respectively.“

US stocks rebounded overnight ahead of tomorrow’s Federal Reserve rates announcement. A final-hour recovery lifted the S&P 500 by 0.57 per cent. The Nasdaq Composite gained 1.63 per cent.

Going up

Growth stocks rebounded after the Nasdaq’s leading role overnight. Zip Co climbed 6.82 per cent, Appen 6.29 per cent and Block 5.79 per cent. EML Payments put on 3.41 per cent, Clinuvel Pharmaceutical 2.89 per cent and Xero 2.84 per cent.

News that blood plasma collection had returned to pre-Covid levels lifted CSL 1.85 per cent. Product demand and margins were expected to return to pre-pandemic levels “over time”.

Aussie Broadband bounced 2.12 per cent after clarifying yesterday’s earnings guidance did not include input from its recent acquisition of Over The Wire. The telco expects the acquisition to be earnings accretive.  

A positive trading update lifted Domain 3.36 per cent from a 21-month low. The online listings provider told today’s Macquarie Australia Conference that revenues increased 24 per cent last quarter from the prior corresponding period. Digital margins also improved.

A 9.7 per cent lift in third-quarter sales from the same time last year helped lift Woolworths 0.44 per cent. Ecommerce sales jumped 33.4 per cent as customers switched to online delivery.

Kitchen appliance manufacturer Breville Group bounced 0.69 per cent from a 22-month low after reaffirming full-year earnings guidance.

Dexus firmed 0.69 per cent after upgrading distribution guidance. The property group forecast distribution per security growth of not less than 2.5 per cent this financial year.

Going down

AGL declined 2.44 per cent after Atlassian founder Mike Cannon-Brookes emerged as a major shareholder and vowed to oppose the energy giant’s proposed demerger. The board said it remained committed to implementing the demerger by June 30.

Corporate Travel Management shed 2.4 per cent after warning the Omicron variant slowed its earnings recovery. The firm said it expected a strong final quarter to provide momentum into next financial year.  

A blowout in costs dragged Cleanaway down 4.29 per cent. The waste manager said flood damage and higher fuel and labour costs would knock $15-$20 million off earnings.

Endeavour Drinks fell 1.3 per cent on news the Managing Director of Dan Murphy’s, Alex Freudmann, had resigned to return to the UK.  

The newly-listed Equity Story Group fell 27.5 per cent. The morning’s other debutant, Sierra Nevada Gold, inched up 1 per cent.

Other markets

A subdued morning on Asian markets saw the Asia Dow rise 0.17 per cent. Hong Kong’s Hang Seng slid 0.51 per cent. Trade in Japan and mainland China was suspended for public holidays.

US futures rallied as bond yields backed off overnight highs. S&P 500 futures climbed 20 points or almost 0.5 per cent.

Oil edged higher. Brent crude firmed 17 US cents or 0.16 per cent to US$107.75 a barrel.

Gold added to its overnight loss, falling US$1.70 or 0.1 per cent to US$1,861.90 an ounce.

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