Australian shares fall ahead of the RBA meeting on Tuesday, pulled down by a slide in global equities as US jobs data signals the Federal Reserve will likely continue raising interest rates to ease inflation.
The RBA is expected to raise interest rates tomorrow and economist predict that rates would go up between 25 and 50 basis points.
According to RateCity, if the RBA hikes the cash rate by 0.25 percentage points, the average owner-occupier with a $500,000 debt and 25 years remaining will see their repayments rise by a further $66.
Technical assumptions in the RBA board minutes presume the cash rate could increase to 1.75 per cent by the end of the year and hit 2.5 per cent by the end of 2023.
If this happens, the same borrower with a $500,000 loan balance could see their monthly repayments rise, in total, by $652 a month by Christmas next year.
"The board may stick to a standard 0.25 percentage point hike, but there’s every chance it will be more hard-hitting," said RateCity research director Sally Tindall.
“With petrol and grocery prices continuing to shoot up, the case for a 0.40 percentage point hike is strong.
The ASX 200 closed down 33 points, or 0.5 per cent, to 7,206.
At the same time, the Australian dollar was down, to 71.95 US cents.
Metals and mining index declined 1 per cent, with Rio Tinto, BHP and Fortescue falling between 0.2 per cent and 0.9 per cent.
Financials retreated 0.6 per cent. NAB and ANZ dropped 0.5 per cent and 0.8 per cent, respectively.
Shares of Magellan slumped 13.9 per cent, to $12.85, on announcement that its funds under management (FUM) fell to $65 billion by May 31, from $68.6 billion in the month prior.
Technology stocks were the lead laggards on the local bourse, tumbling 1.6 per cent as they tracked Wall Street's weak finish from Friday.
Block, Xero and WiseTech were down between 1.5 per cent and 3.2 per cent.
On the upside, energy stocks gained 2.1 per cent and hit a more-than-two-year high, as oil prices rose in early trade after Saudi Arabia raised prices sharply for its crude sales in July.
Oil and gas giant Woodside Energy climbed 3.2 per cent in its fourth straight session of gains.
Meanwhile, Santos rose 2 per cent, to hit a more-than-two-year high after the gas producer said on Sunday that it was taking steps, along with its joint venture partner Beach Energy (+1.4 per cent), to increase domestic supply of the energy resource.
Rio Tinto sued over alumina refinery
Russian aluminium producer Rusal has filed a lawsuit against global miner Rio Tinto, seeking to win back access to its 20 per cent share of the alumina produced at a jointly owned refinery in Queensland.
The lawsuit challenges Australia's response to Russia's invasion of Ukraine, which included wide-ranging sanctions against Russian firms and oligarchs who had links with President Vladimir Putin.
Rio stepped in to take sole control of Queensland Alumina Ltd (QAL) in April, sidelining Rusal and cutting its access to the refinery's output of alumina, a compound from which aluminium is derived.
While Rio owns 80 per cent of the refinery, Rusal owns the remaining 20 per cent.
Rusal's Australian unit, Alumina and Bauxite Company (ABC), said in a Australian Federal Court filing that the circumstances required for Rio to step in to take control did not exist, and amounted to a breach of obligations, according to the court documents reviewed by Reuters.
Rio's move at QAL came shortly after the world's biggest iron ore miner severed all ties with Russian businesses over Moscow's invasion of Ukraine. Russia calls its military actions in Ukraine "a special operation".
Australia banned the export of alumina and aluminium ores, including bauxite, to Russia in March.
US jobs report beats expectations
Global equity markets fell on Friday.
Data showed the American economy generated more jobs than expected in May, signalling the Federal Reserve will likely continue raising interest rates in its effort to curb inflation.
The US Labor Department's closely watched employment report showed the US economy added 390,000 jobs in May, with the unemployment rate holding steady at 3.6 per cent for a third straight month, beating most analyst estimates.
Traders were hoping the jobs report would reveal stronger signs of weakness in the US economy that would help persuade the Fed to soften its stance on inflation and interest rates to avoid triggering a recession.
"It was strength across the board with the exception of retail trade, and the economy on the jobs front continues to power forward," said Josh Wein, portfolio manager at Hennessy Funds in Chapel Hill, North Carolina.
"The Fed still needs to unfortunately destroy a little bit of demand and they are going to continue to do that for at least the next few meetings with 50-point rate hikes."
The MSCI world equity index, which tracks shares in 50 countries, was down 1.11 per cent.
The pan-European STOXX 600 index was also down 0.26 per cent.
On Wall Street, all three major indexes were led lower by sell-offs in the technology, consumer discretionary, communication services, financials and industrials sectors.
The Dow Jones Industrial Average fell 0.98 per cent, to 32,923.57, the S&P 500 lost 1.57 per cent, to 4,111.41 and the Nasdaq Composite dropped 2.46 per cent, to 12,013.45.
"Some of the rally (in equities) of late was due to the Fed acknowledging that in the fall they could reassess and take a pause perhaps," Mr Wein said.
"But the market is retracing some of their earlier losses and saying basically that's all off the table."
Oil prices rose, buoyed by expectations that OPEC's decision to increase production targets by slightly more than planned will not affect tight global supply much and by rising demand as China eases COVID-19 pandemic-related restrictions.
Brent crude was up, trading at $US121.41 a barrel, by 10:07am AEST.
ABC/Reuters
