ASX 200 afternoon report: 5 December 2023

During today's board meeting, the Reserve Bank of Australia (RBA) maintained its expected stance by keeping the official cash rate at 4.35%. The RBA has maintained a consistently hawkish tone since the 25bp rate hike in November.

However, a string of cooler-than-expected data last week across house prices, retail sales, and inflation suggests that the RBA's thirteen rate hikes between May 2022 and November 2023 are having the desired effect.

"Higher interest rates are working to establish a more sustainable balance between aggregate supply and demand in the economy,” said Michele Bullock, governor of the RBA.

In the accompanying statement, the RBA noted that:

"The monthly CPI indicator for October suggested that inflation is continuing to moderate, driven by the goods sector; the inflation update did not, however, provide much more information on services inflation."

The RBA retained a tightening bias, using the same wording used in the November statement, watered-down from previous months.

"Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks."

Whether the RBA will deliver on the hawkish bias when it meets in February next year will depend largely on incoming data.

• Q3 GDP (Wednesday, December 6 at 11.30am AEDT)
• Employment Report for November (Thursday, December 14 at 11.30 am AEDT)
• Monthly CPI indicator and retail sales (Thursday, January 11 at 11.30 am AEDT)
• Employment Report for December (Friday, January 19 at 11.30 am AEDT)
• Q4 inflation (January 25 at 11.30 am AEDT)

Prior to the meeting, the rates market was pricing in about a 35% chance of a 25bp rate hike in February. That has eased back to ~10% after the RBA's dovish hold.

What happened to the ASX 200?

Following the RBA's on-hold announcement, the ASX 200 bounced about 25 points off its intra-day low of 7041 to be trading at 7076, down 59 points (-0.83%) at 3.20 pm AEDT.

Most of the damage to the index today came courtesy of the heavyweight materials and energy sectors, as overnight falls in key commodities weighed. Falls including gold (-1.97%), crude oil (-1.11%), copper (-2.44%) and silver (-3.62%).

Yesterday, saw the ASX 200 test our upside target, the 200-day moving average at 7161. If the ASX 200 can see a sustained break above the 200-day moving average, it will then open a move towards range highs 7380/7400. Until then, a dip back towards 7000 is possible.

ASX 200 daily chart

• _{Source Tradingview. The figures stated are as of 5 December 2023. 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.}