Australia’s ASX 200 index edged lower earlier on Tuesday after the Reserve Bank of Australia (RBA) released its interest rate decisions for July. Japan’s Nikkei 225 index increased after the release of better-than-expected household spending data. Hong Kong’s Hang Seng index as well as Chinese mainland stocks took a nosedive amid ongoing concerns about the future regulation of China’s powerful tech sector.
Australia Inflation Concerns
The ASX 200 index was in the red after the release of the RBA interest rate decision for July. The board decided to retain the April 2024 bond as the bond for yield target and keep the target of 10 basis points.
The board announced the continuation of purchase of government bonds on the completion of the current bond purchase [program in September. The purchase rates will be at $4 billion per week until at least mid- November.
The Reserve Bank of Australia maintained its current cash rate target at 10 basis points and the interest rate on Exchange Settlement balances at zero per cent.
According to the RBA, these measures will provide support to the economic transitions from the recovery phase to expansion phase. The economic recovery in Australia is stronger than expected. Investment outlook has largely improved. Household and business balance sheets have been positive.
High prices for commodity exports have supported the national income. With the easing of lockdown restrictions, domestic financial conditions improved. The labor market has also been recovering swiftly. Unemployment rate slipped to 5.1% in May and jobs growth is better than pre-pandemic levels.
Despite the strong recovery in jobs growth and reports of labor shortages, inflation, and wage outcomes remain on a slowdown. Inflation in underlying terms is expected to be 1.5% over 2021 and 2% by mid-2023. CPI inflation is expected to transitorily spike to 3.5% by the end of the year.
The board remains committed to maintaining highly supportive monetary conditions. The central bank announced that it would not increase its cash rate until inflation was stable at 2% or 3%. However, the bank does not expect that to happen earlier than 2024.
ASX 200 Movers
Whitehaven Coal Limited was the best performer in the ASX 200 index. The company’s current price is at $1.48 per share and has a market cap of $1.5 billion. The company gained more than 4.63% in its stock earnings.
Oil Search Limited was up by 3.97% on Tuesday. The company’s share price has been on an upward trend and is currently at $3.87. Pilbara Minerals Limited gained 3.10% in its stock earnings. the company recorded further strong lithium results from Pilgangoora.
Among the laggards in the index include Polynovo limited, Appen Limited and Ramelius Resources Limited. Each lost 7.22%, 5.65% and 4.44% respectively.