The ASX has fallen and the Australian dollar has jumped, after the Reserve Bank raised official interest rates for the first time in 11 years to curb surging inflation, which is running at an annual rate of 5.1 per cent.
Official rates were slashed to a record low of 0.1 per cent in 2020 as an emergency response to the coronavirus pandemic.
The median forecast of 32 economists surveyed by Reuters showed the central bank would lift the cash rate by 15 basis points to 0.25 per cent from 0.1 per cent today.
The Australian dollar surged by more than 1 per cent to 71.4 US cents after the RBA announcement at 2:30pm AEST.
The local currency fell to an overnight low of 70.31 US cents, prompted by the rise of the greenback to a 20-year high before another expected rate increase by the US Federal Reserve this week.
At 4:40pm AEST, the Australian dollar was up 1.1 per cent to 71.23 US cents.
Consumers are worried about higher interest rates after the latest inflation figures showed that prices rose by the most in 20 years over the first few months of the year, because of the war in Ukraine, the global supply chain squeeze and the strong Australian economy.
ANZ said its measure of consumer confidence fell 6 per cent last week, the sharpest drop since the Omicron variant of COVID-19 swept through the eastern seaboard in January.
Confidence among mortgage borrowers slumped nearly 10 per cent over the week.
ASX in the red
The local share market opened in the red and slipped further after the rates decision came out, ending lower for a second day.
Higher borrowing costs weigh on consumer spending, and banks came off their lows because higher interest rates raise their revenue.
Westpac (+0.1pc) gained, while National Australia Bank (-0.7pc), ANZ (-0.15pc) and the Commonwealth Bank (-0.7pc) fell.
Real estate investment trusts were hit by the prospect of higher interest rates, and the mining, consumer and financial indexes also ended lower.
Technology stocks did the best, tracking their peers on Wall Street.
At the close, the All Ordinaries index fell 0.5 per cent to 7,588, and the ASX 200 lost 0.4 per cent to 7,316.
The best performers on the ASX 200 were Magellan Financial Group (+5.4pc), technology company Appen (+5.2pc), and buy now, pay later firm Zip (+5pc).
Going down were vegetable and fruit grower Costa Group (-6pc), biotech firm Imugene (-5.3pc) and retailer Premier Investment (-5.1pc).
Woolworths trading update
In a trading update, supermarket chain Woolworths said it was still facing problems stocking its shelves because of supply disruptions and staff shortages from COVID-19.
The value of sales over the third quarter jumped to $11.4 billion because of supply chain blockages and higher fuel prices, as inflation rose at the fastest pace in two decades.
Woolworths shares rose 0.6 per cent to $38.51.
Telstra announced that Michael Ackland would become the new chief financial officer to replace Vicki Brady, who takes over in September from departing chief executive, Andy Penn.
Tech billionaire becomes largest AGL investor
Atlassian co-founder Mike Cannon-Brookes, has bought 11.3 per cent of AGL Energy, becoming its largest shareholder through his private investment firm, Grok Ventures.
In a letter sent to AGL's board of directors last night, he said he would vote against a proposed demerger, labelling it a "flawed plan."
"Grok Ventures has acquired more than an 11 per cent interest in AGL, becoming the largest shareholder," Mr Cannon-Brookes tweeted.
It comes two months after the company rejected his takeover bid.
AGL is Australia's largest electricity generator and largest greenhouse carbon emitter.
AGL fired back and told the stock market that the demerger, which would split the business into two companies: an energy retailer and a power generator, was in the best interest of shareholders.
It acknowledged that its largest shareholder would vote against the demerger proposal.
In a statement to the ABC, an AGL spokesperson said the company had not been contacted by Grok Ventures.
"The AGL Energy demerger is on track to be completed by the end of next month," the spokesperson said.
AGL shares fell 3.1 per cent to $8.35.
US stocks rally after wild night
Wall Street ended higher after wild swings between profit and losses.
It was a volatile night of trade on the New York Stock Exchange, a day before the US Federal Reserve meets to consider its next move on interest rates.
US stocks fell 1 per cent at one stage, after a steep sell-off on Friday, as investors worried about higher interest rates and slower economic growth.
The Nasdaq turned positive in afternoon trade as investors bought up beaten-down technology firms.
The benchmark S&P 500 rebounded after dropping to the lowest since May 2021, and the Nasdaq fell to the lowest since November 2020 during the session.
By the close, the Dow Jones Industrial Average rose 0.3 per cent to 33,062, the S&P 500 gained nearly 0.6 per cent to 4,155, and the Nasdaq increased 1.6 per cent to 12,536.
Returns or yields on benchmark 10 year US Treasury bonds hit 3 per cent for the first time in more than three years.
The 10-year yield is an important barometer for mortgage rates and other financial instruments.
It has surged over the last two months as the bond market prepared for the US central bank to reduce its balance sheet, which ballooned to nearly $US9 trillion as the Federal Reserve bought bonds during the pandemic to stimulate the economy.
The Fed meets this week and is expected to raise interest rates by 50 basis points, to 0.75 per cent to 1 per cent, to tackle the strongest price rises in 40 years.
EU ban on Russian oil looms
Oil prices rose overnight on continuing concerns over supply shortages as the European Union considers a ban on Russian crude oil because of the invasion of Ukraine.
Diesel prices rallied 5 per cent to $US4.0172 a gallon as a low supply of global inventories put pressure on oil prices.
Brent crude gained 0.6 per cent to $US107.62 a barrel at 7am AEST.
Earlier in the session, Brent and West Texas Crude fell on the news that the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalise its next round of sanctions on Russia.
The EU is looking at banning Russian oil imports by the end of 2022, a major source of revenue for Russia.
Hungary and Slovakia are heavily dependent on Russian fossil fuels.
Spot gold slipped 1.8 per cent to $US1862.37 an ounce.
ABC/Reuters
