The ASX in 5: US stocks close at all-time highs

US stocks close at all-time highs

A late run for the US 500 saw the index hit fresh record highs overnight, off the back of a 0.60% rally on the day. The move came as investors seemed to dip their toes back into areas of the market a little more exposed to the global growth outlook. Energy and financial stocks led the pack, as a pop in Oil - US Crude prices for the former, and a jump in bond yields for the latter, bolstered both sectors fundamentals.

Bank of England flags path to policy normalisation

The Bank of England (BoE) kept policy settings unchanged last night, as expected. However, the central bank did surprise slightly with a more hawkish tone in its commentary than had been expected. Amidst improving economic fundamentals, as a successful vaccine program supports the reopening of the UK economy, the BoE suggested it sees the need for “modest tightening” of policy in the future. It also stated that it believes it will begin to unwind its balance sheet when the bank rate hits 0.1%, a mark that traders have currently priced for around the middle of 2023.

Reserve Bank of Australia's (RBA) Statement on Monetary Policy implies only temporary hit to economy from lockdowns

Local trade was highlighted by the RBA’s quarterly Statement on Monetary Policy trade. The document revealed that the central bank forecasts only a relatively modest and temporary hit to the Australian economy from recent lockdowns, with projections for year end GDP in December downgraded from 4.75% to 4.00%. In a testimony delivered before the House of Representatives Standing Committee on Economics prior to the release, Governor Lowe justified not reversing its decision begin tapering its QE program on the expectation that the RBA expects economic activity to bounce back after these lockdowns, though acknowledges the outlook remains contingent on the virus.

Output growth and inflation forecasts (percentage)

ASX 200 trading flat

The Australia 200 is trading flat as of mid-afternoon trade, in a day which has seen the index trade in a relatively 15-point range. As one would expect, it’s been a mixed session for stocks overall, with another jump in IT stocks, a bounce in energy stocks and a slight lift in financials not able to counteract what’s been another reasonable sell-off in materials stocks.

All in all however, it’s proven to have been a positive week for Australian equities. The ASX 200 remains perched at fresh record highs and is poised to close the week more than 1.5% higher.

US Non-Farm Payrolls to mark climax of week’s trade

The week’s trade will come to a climax tonight with the release of monthly US Non-Farm Payrolls data. The consensus estimate is for the US economy to have added 860,000 last month, though the spread of projections amongst surveyed economists ranges from 350,000 to 1.2 million. As always, the US jobs data will be crucial for markets, and is likely to elicit a level of volatility in markets upon its release, as market participants continue their efforts to price in the path of US monetary policy going forwards.

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