The local share market snaps its eight-session winning streak but still manages a gain for the week.
The RBA's financial stability review finds Australia's banks and most households and firms are resilient, despite some pockets of stress.
Here's how the day's events unfolded, with insights from our business reporters on the markets blog.
Disclaimer: this blog is not intended as investment advice.
Key events
Live updates
Market snapshot at 4:25pm AEST
By Stephanie Chalmers
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All Ordinaries: -0.3% to 7,412 points
- ASX 200: -0.25% to 7,219 points
- Australian dollar: -0.3% to 67 US cents
- NZ 50: +0.02% to 11,870 points
- Nikkei 225: -1.2% to 27,472 points
- Hang Seng: -0.3% to 20,202 points
- Shanghai Composite: -0.2% to 3,305 points
- Brent crude: -0.5% to $US84.61/barrel
- Spot gold: -0.3% to $US2,013/ounce
- Bitcoin: -0.4% to $US28,043
ASX snaps eight-session streak but higher for the week
By Stephanie Chalmers
That's a wrap on a shortened trading week and it hasn't ended on a positive note.
The All Ordinaries lost 0.3 per cent over the Thursday session.
The ASX 200 declined by a quarter of a per cent, but still managed to gain 0.6 per cent over the week — its second weekly gain in a row.
Here's how the sectors ended on the benchmark index:
And it was a bit of a mix in terms of the biggest moving stocks of the session:
Around the region, markets in Tokyo, Hong Kong and Shanghai are lower while New Zealand's market is little changed.
The Australian dollar is down around a third of a per cent, to around 67 US cents.
Locally, the big news of the day was the Reserve Bank's financial stability review, which modelled how Australian borrowers will fare under higher interest rates.
Here's business reporter Michael Janda with a handy summary of the key takeaways:
The ASX, and this blog, will be taking a long weekend, so we'll be back on Tuesday morning bright and early.
In the meantime, stay safe if you're on the roads over the next few days.
ANZ predicts interest rates will stay on hold until August
By Kate Ainsworth
ANZ Research has just sent out their revised cash rate outlook this afternoon, in light of the RBA pressing pause on the rate hike cycle on Tuesday.
They're now expecting the RBA will keep the cash rate unchanged until August, when they forecast a 0.25 percentage point increase that would take the cash rate to 3.85%.
The bank had previously expected hikes in April and May to reach a rate of 4.1%.
But those hoping for a reprieve any time soon are out of luck — ANZ said that's unlikely rates will start coming down until the end of next year.
"Having paused in April, though, the bar for a rate hike in May is high," the ANZ report said.
"While labour force, consumer spending and business survey data will all be important, ultimately the Q1 CPI print would need to exceed the RBA’s forecasts to prompt a rate hike in May in our view. The monthly CPI indicator suggests that’s unlikely to be the case.
"Inflation and wage data are likely to remain elevated after August, and this will keep risks tilted towards a higher terminal rate.
"But we expect that weakening global and domestic growth will give the RBA justification to keep rates on hold for an extended period, with an easing in policy unlikely until late-2024."
Australian industry continues to contract amid high rates
By Kate Ainsworth
New figures from the Ai Group show Australian industry has contracted significantly off the back off falling demand.
The Ai Group Australian Industry Index, which measures the change in activity in the country's industrial sector, dropped by 4.4 points to -6.1 points last month.
It means the index has continued to contract since May 2022, when the RBA began lifting interest rates.
The data also shows monthly new orders fell by 28.1 points to -19.8. Not only is that fall bigger than what was seen in April 2020 caused by COVID-induced shutdowns, it's also the biggest fall for new orders on record.
It isn't all bad news though, with figures showing manufacturing rebounded thanks to the food and beverage and chemicals sectors.
Market snapshot at 2:50pm AEST
By Stephanie Chalmers
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All Ordinaries: -0.5% to 7,400 points
- ASX 200: -0.4% to 7,207 points
- Australian dollar: -0.3% to 66.98 US cents
- NZ 50: -0.2% to 11,848 points
- Nikkei 225: -1.3% to 27,459 points
- Hang Seng: -0.1% to 20,264 points
- Shanghai Composite: flat at 3,311 points
- Brent crude: -0.6% to $US84.46/barrel
- Spot gold: -0.3% to $US2,013/ounce
- Bitcoin: -0.2% to $US28,080
Losses accelerate in afternoon trade
By Stephanie Chalmers
The local market is seeing losses get worse as the session progresses.
Here is how today has played out so far on the All Ordinares, which is currently off around half a per cent:
And taking a quick check around the region, it's a bit of a mixed bag:
- Shanghai Composite: flat
- NZ 50: +0.1%
- Nikkei 225: -1.2%
- Hang Seng: +0.2%
'Car crash' for imports offsets fall in exports
By Stephanie Chalmers
The Bureau of Statistics has released Australia's trade balance for February and it's increased more than expected — up $2 billion to $13.8 billion.
That's despite a 2.9 per cent decline in exports in the month, as iron ore and liquefied natural gas exports declined.
The reason? There was what JP Morgan has coined a 'car crash' for imports, which fell 9.1 per cent.
In particular, imports of non-industrial transport equipment… so, mainly cars… dropped 35 per cent in the month.
But it's not as significant as the figure suggests, according to JP Morgan economist Jack Stinson:
"While durable goods imports, such as automotives, should be more sensitive to interest rate increases, both series rose over 30% [month-on-month] in January and, in level terms, are still strong on an historical basis.
"So today’s large falls in percentage terms should mainly reflect normalisation from last month’s very elevated prints, rather than genuine contractions in demand."
Meanwhile, Capital Economics is taking the print as a sign of weakness for the local economy, given it was driven by the drop in imports.
"Even though net trade will make a positive contribution to real GDP growth this quarter, we remain downbeat about the economic outlook more broadly," Capital Economics economist Abhijit Surya wrote.
Just a speed bump, or a real gridlock? …I'll see myself out.
9% of borrowers at risk of running down savings by mid-2024
By Stephanie Chalmers
While the Reserve Bank is taking comfort from the fact than more than 60 per cent of home loan accounts are ahead of scheduled repayments, when you include balances in offset account s and redraw facilities, where does than leave the other ~40 per cent?
According to today's financial stability review, around 9 per cent of borrowers are at risk of running down their savings by mid-next year, even if they slash their non-essential spending by up to a whopping 80 per cent.
And the central bank's analysis has only considered what will happen until mid-2024, not what will play out if interest rates remain high for a prolonged period — which would inevitably see even more households lose their savings buffers.
You can read a full wrap up from business reporter Michael Janda here:
Market snapshot at 12:20pm AEST
By Stephanie Chalmers
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All Ordinaries: -0.3% to 7,412 points
- ASX 200: -0.2% to 7,220 points
- Australian dollar: -0.2% to 67.01 US cents
- Dow Jones: +0.2% to 33,482 points
- S&P 500: -0.2% to 4,090 points
- Nasdaq: -1.1% to 11,996 points
- FTSE: +0.4% to 7,662 points
- EuroStoxx 600: -0.2% to 456 points
- Brent crude: -0.7% to $US84.41/barrel
- Spot gold: -0.5% to $US2,010/ounce
- Iron ore: -0.8% to $US117.80/tonne
- Bitcoin: -0.3% to $28,076
Some borrowers at risk of default but banks will be fine
By Stephanie Chalmers
Business reporter Michael Janda has been reading through the RBA's financial stability review and the headline is — some home loan borrowers are facing a serious risk of default, but the Australian banks will comfortably survive any losses.
In October's review, the RBA modelled what would happen to household budgets, should the cash rate hit 3.5 per cent.
Well, that ship has sailed, with the cash rate sitting at 3.6 per cent.
So they've updated that modelling, and here's Michael's summary:
"Given that last year’s modelling assumed a cash rate of around 3.5 per cent and the latest model uses a 3.75 per cent cash rate, it is unsurprising that the results remain very similar.
"In the baseline scenario, the share of borrowers with negative spare cash flow – that is, those whose scheduled mortgage repayments and essential living expenses are projected to exceed their household disposable income – would reach around 15 per cent by the end of 2023, with many of these borrowers already projected to be in this position under the assumptions used in this model," the RBA noted.
"This 'baseline scenario' also assumes that unemployment rises only slightly from current levels, that incomes rise by 4.25 per cent and living costs increase 4.75 per cent this year.
"The bank also modelled an 'adverse scenario' where, even though rates remain at 3.75 per cent, unemployment climbs a couple of percentage points to 5.5 per cent by year’s end, underemployment also rises 2 percentage points and both wages growth and inflation are lower than the baseline forecast, by 0.75 and 1 percentage point respectively.
"In the adverse scenario, the share of borrowers experiencing negative spare cash flows by December 2023 would increase slightly to 17 per cent," the bank forecast.
Global financial stability risks have increased: RBA
By Stephanie Chalmers
The Reserve Bank has released its half-yearly financial stability review and it's particularly relevant reading at the moment, given the collapse of several US lenders, the fate of Credit Suisse in Europe and the resulting market volatility.
It's a lengthy read and our reporter Michael Janda has been pouring over it and will shortly bring us some detailed analysis.
In the meantime, here are the key points summarised by the RBA:
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Global financial stability risks have increased, investors have become more risk-averse
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Australian banks are well-regulated, well-capitalised, profitable and have high liquidity, and the system remains strong
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Household budgets are under pressure and financial stress is increasing for some, but most remain resilient
Stay with us for more detail.
ASX in the red
By Stephanie Chalmers
Just over an hour into the session and the local market's a little more firmly in the red now.
The ASX 200 is down around 0.2 per cent, with the big banks in the red, the major miners edging higher.
Looking at the best and worst performing stocks so far by percentage change, it's a bit of a mixed bag.
On the downside, Inghams is down 6.7 per cent, while some gold and lithium miners are among the other early falls.
Moving higher are Imugene (+3.6%), ASX (+2.7%) and Bega Cheese (+2.1%).
If the benchmark index continues to track lower, it will see it snap its eight session winning streak (although, let's be honest, yesterday's 1 point gain was nothing to write home about).
But it's still very possible we'll finish higher over this shortened week.
A 'double whammy' housing crisis according to St George
By Stephanie Chalmers
Sincere apologies to the one-third of Australian households who rent for the bleak nature of my blog posts this morning.
St George chief economist Besa Deda and senior economist Pat Bustamante have released a note on what they call the 'double whammy' facing renters — the fact that rents are rising at the same time that house prices are stabilising.
The economists warn that there are few short term solutions to boost housing supply, due to headwinds facing the construction sector, the sharp fall in building approvals from their peak and the time it takes to plan, approve and build projects.
At the same time, they say it won't be easy for renters to make the switch to home ownership:
"Dwelling prices appear to be finding a bottom. In March, dwelling prices recorded their first rise in eleven months.
"Typically, an upturn in dwelling prices does not occur when the RBA is still in a hiking cycle.
"But we are not living through a typical period.
"Demand, underpinned by strong population growth, is pushing up against low volumes of housing available for sale."
Here's a chart showing the rise in population compared to rental vacancies:
While St George economists note that some households will be forced to sell their homes due to the pressure of higher mortgage costs, they note that low unemployment as well as low levels of people falling behind on repayments will minimise the housing market stress.
So alas, it's unlikely to lead to some great opportunity for renters to jump into home ownership.
Market snapshot at 10:20am AEST
By Stephanie Chalmers
- All Ordinaries: -0.03% to 7,431 points
- ASX 200: flat at 7,237 points
- Australian dollar: -0.1% to 67.12 US cents
- Dow Jones: +0.2% to 33,482 points
- S&P 500: -0.2% to 4,090 points
- Nasdaq: -1.1% to 11,996 points
- FTSE: +0.4% to 7,662 points
- EuroStoxx 600: -0.2% to 456 points
- Brent crude: -0.1% to $US84.93/barrel
- Spot gold: flat at $US2,019/ounce
- Iron ore: -0.8% to $US117.80/tonne
- Bitcoin: -0.3% to $28,076
ASX around the flatline in early trade
By Stephanie Chalmers
So it's been a few minutes of the local session so far, and All Ords and ASX 200 can't seem to decide which way they want to go.
As of right now, we've got the All Ords down by less than a point and the ASX 200 up 2 points, but that's likely changed by the time I finish this sentence.
Here's how the sectors are stacking up:
We'll keep you posted on how things develop over the next little while as the market finds some direction.
Property Council calls for boost for build-to-rent sector
By Stephanie Chalmers
With this morning's confirmation that rental pain is on the rise across the country, schemes to boost housing supply will certainly attract interest.
The Property Council is backing the "build-to-rent" sector as one solution, calling for the tax paid on such investments to be reduced.
Given the Property Council represents developers and other real estate companies, with its national board featuring reps from Dexus, Stockland, Mirvac and Lendlease among others, it's little surprise it would back such a tax change, which it argues will increase foreign investment in the sector.
Build-to-rent schemes involve developments that are built and then managed by a single owner, with the purpose of renting out the units rather than selling them off individually.
Essentially, the property developer is the landlord.
The EY report commissioned by the Property Council found 150,000 build-to-rent apartments could be delivered in the next decade if the federal tax changes were implemented.
Speaking to ABC's AM program, the Community Housing Industry Association said build-to-rent benefits younger renters who struggle to get into home ownership but are looking for more security than the private rental market.
You can listen to the full report from Matt Bamford here:
Market snapshot at 9:00am AEST
By Stephanie Chalmers
- ASX SPI 200 futures: -0.1% to 7,254 points
- Australian dollar: flat at 67.21 US cents
- Dow Jones: +0.2% to 33,482 points
- S&P 500: -0.2% to 4,090 points
- Nasdaq: -1.1% to 11,996 points
- FTSE: +0.4% to 7,662 points
- EuroStoxx 600: -0.2% to 456 points
- Brent crude: flat at $US84.99/barrel
- Spot gold: flat at $US2,020/ounce
- Iron ore: -0.8% to $US117.80/tonne
- Bitcoin: flat at $US28,163
The robots are coming… to Walmart by 2026
By Stephanie Chalmers
American discount department store giant Walmart this morning confirmed it will be slowing down its hiring, as it plans to automate more of its business.
And that's not good news for workers, as Walmart is the largest private employer in the US.
Speaking at an investor meeting in Florida, Walmart chief financial officer David Rainey had this to say:
"We believe, over time, the number of associates will grow, but at a slower pace than in the past as we complement people growth with technology and automation."
It follows an update earlier this week, which revealed the company expects around 65 per cent of its stores to be serviced by automation by 2026.
Walmart is laying off more than 2,000 staff in the online order fulfilment side of its business.
And it sees around 55 per cent of packages it processes being moved through automated facilities in three years' time.
ICYMI: RBA taking the pulse of the economy
By Stephanie Chalmers
It's been a big week of news out of the Reserve Bank, and it's due to release its half-yearly financial stability review in a few hours time, but that's more of a health check on the financial system.
In the meantime, you can catch up on what governor Philip Lowe had to say yesterday about the decision to pause rate rises this month, the outlook for the Australian economy and where to from here, in this report from Rhiana Whitson:
House rents at record highs across all capitals
By Stephanie Chalmers
Perhaps home owners with mortgages are resting (somewhat) easier this week after the RBA paused its rate hikes this month.
But renters are still feeling the pain of their housing costs rising.
According to a report from Domain, rents on houses across all capital cities are at record highs — for the first time in a decade.
Some other eye-watering stats from the report:
- It's the longest stretch on continuous rental price growth the country has seen
- Unit rents are also at record highs in most capitals
In a slight sign of some sort of relief on the horizon… perhaps, maybe… vacancy rates edged higher in March but remain below 1 per cent, and at record lows in Sydney and Melbourne.
You can read more here from David Taylor:
