RBA & ASX 200 afternoon report: 6 February 2024

The ASX 200 trades 44 points (-0.55%) lower at 7582 at 3.15 pm AEDT.

A fifth consecutive day of increased volatility for the ASX 200 today, unable to capitalise on last Wednesday’s post-CPI break higher or reject it.

The main cause of its indecisive behaviour is renewed pessimism around the Chinese economy, and a surging US dollar. Both have weighed on the price of commodities and the heavyweight ASX 200 materials sector.

RBA's hawkish stance in first 2024 meeting

In today's initial RBA board meeting of 2024, the outcome was slightly more hawkish than anticipated. The Reserve Bank of Australia (RBA) maintained the official cash rate at 4.35%, stating, "Higher interest rates are working to establish a more sustainable balance between aggregate demand and supply in the economy." The RBA expressed concerns regarding elevated and persistent service inflation, noting, "While there have been favourable signs on goods price inflation abroad, services price inflation has remained persistent, and the same could occur in Australia."

Given its concerns, the RBA indicated its decisions are data-dependent and maintained a tightening bias. "The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks, and a further increase in interest rates cannot be ruled out."

Before the announcement, the rates market was anticipating a full 25 basis point rate (bp) cut by August, with an additional 20bp of rate cuts expected before the end of the year. Following the 2:30pm announcement, the rates market has adjusted the timing of the RBA’s initial rate cut to September. It now forecasts a 60% likelihood of another 25bp rate cut before the year's end. Attention is now focused on the press conference scheduled for 3:30pm.

Today's market movement

Mining sector

Returning to the action on the local bourse. It was another rough day for the big miners.

• Fortescue: -3.1% to $28.00
• Mineral Resources: -1.48% to $55.38
• BHP: -1.18% to $45.90
• Rio Tinto: -0.68% to $128.22

Consumer-facing stocks

• Myer: +17.67% to $0.78c
• Nick Scali: +15.74% to $13.90

Healthcare sector

• Cochlear lost 6.93% to $287.10, after its rating was cut to sell by a European broker concerned with a vaccine being developed by Moderna, which will threaten implant sales.

Banking sector

• Macquarie: -1.22% to $187.95
• CBA :-1.11% to $114.20
• NAB: -0.62% to $32.14
• Westpac:-0.35% to $24.10
• ANZ: +0.74% higher at $27.28

ASX 200 technical analysis

While the ASX 200 maintains altitude above horizontal support at 7570, we look for the ASX 200 to trade towards 7900. Aware that if the ASX 200 were to lose support at 7570 on a sustained basis, it would warn that last week's up move was a false break higher and consign the ASX 200 to another round of range trading.

ASX 200 daily chart

• _{Source: TradingView. The figures stated are as of 6 February 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.}