ASX 200 afternoon report: 7 May 2024

The ASX 200 trades 96 points (1.25%) higher at 7777 at 3.00pm AEST.

The ASX 200 has ripped higher this afternoon after the Reserve Bank of Australia (RBA) kept its official cash rate on hold at 4.35% at its eagerly anticipated board meeting today. In the accompanying statement, the RBA noted that higher interest rates were working to establish a more sustainable balance between demand and supply.

While there are encouraging signs that inflation is moderating: “Services inflation remains elevated and is moderating at a more gradual pace." A factor "consistent with continuing excess demand in the economy and strong domestic cost pressures, both for labour and non-labour inputs."

Reflecting the uncertain backdrop, the RBA's forward guidance was identical to that offered in the March meeting. "The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain, and the Board is not ruling anything in or out," it said.

Key economic indicators to map out RBA's next move

Given the RBA’s heightened sensitivity to the incoming data the market will seek further insights into the RBA’s next move from the following key data ahead of the next RBA Board meeting on June 18th.

• Federal Budget Tuesday, 14 May
• Labour force report Thursday, 16 May
• RBA meeting minutes Tuesday, 21 May
• Retail Sales Tuesday, 28 May
• Monthly CPI indicator Wednesday, 29 May
• Q2 GDP Wednesday, 5 June
• Labour Force report Thursday, 13 June

While we view the bar to another RBA rate hike as high, we acknowledge the window for rate cuts in 2024 has narrowed and last month pushed back our call for a first RBA rate cut from August until November. Ahead of the announcement, there was a ~40% chance of a 25bp rate hike priced into the interest rate market for August, which has fallen to about 25%.

ASX 200 stocks

Mining stocks

• Fortescue: +1.54% to $27.73
• BHP: + 1.45% to $43.38
• Rio Tinto: + 1.47% to $131.59
• Mineral Resources: +0.52% to $7.40

Banking sector

• Macquarie: +2.12% to $190.48
• Westpac: +2.06% to $27.67
• CBA: + 1.45% to $118.25
• ANZ: + 0.14% to $28.81

Consumer-facing stocks

• Kogan: + 5.52% to $4.96
• Nick Scali: + 2% to $15.32
• Adairs: + 2.38% to $2.15
• JB Hi-Fi: + 1.47% to $60.79

ASX 200 technical analysis

As we have noted in recent reports, a 3-5% pullback is very common for the ASX 200 in early May. The big question is, was it pulled forward into April, or does the traditional May pullback still lie ahead? We prefer the latter due to the mixed signs of bottoming at the recent 7492 low. As such, we view the current bounce as a B wave, which should stall around 7800ish before the ASX 200 commences another leg lower (Wave C of an ABC correction) towards the 200-day moving average at 7365ish.

ASX 200 daily chart

• ^{Source TradingView. The figures stated are as of 7 May 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}