ASX 200 afternoon report: 7 November 2023

ASX 200 rebounds on dovish RBA rate hike

At its board meeting today, the Reserve Bank of Australia (RBA) raised its official cash rate by 25bp to 4.35%, its first rate rise since June.

While the upside surprise in Q3 inflation data meant market commentators were widely expecting today's move, markets were less certain, with the interest rate market assigning a 58% chance of a rate hike.

The discrepancy between commentators and the rates market reflected the uncertainty created by recent discussions in political circles as to whether the Q3 upside inflation surprise represented a material change to the RBA's inflation outlook.

Credit to new RBA governor Michele Bullock, who looked through the unpleasantries and political noise to ensure the RBA remained committed to its objective of ensuring inflation returns to target. The RBA retained its tightening bias. However, it was watered down from:

"Some further tightening of monetary policy may be required to ensure that inflation returns to target in a reasonable timeframe, but that will depend upon how the economy and inflation evolve."

To

"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. "

The change in language suggest that the incoming data will need to be red hot for the RBA to act on its tightening bias, including

- Q3 wages data (Wednesday, 15 of November 2023, AEDT)
- October labour force report (Thursday, 16 of November 2023, AEDT)
- October retail sales (Tuesday, 28 of November 2023, AEDT)
- October monthly CPI indicator (Wednesday, 29 of November 2023, AEDT)

Ahead of this afternoon's announcement, the ASX200 was trading 30 points lower at .6967. Following the RBA's dovish rate hike, it has partially recovered to be trading 14 points lower at 6984 at 3.40 pm.

Today’s market movements

IT sector

The best-performing sector has been the IT sector, led by

• ZIP +2.67% to $0.39c
• Wisetech +1.58% to $61.58
• Tyro Payments +1.28% to $0.99c
• Xero +1.20% to $113.16.

Consumer discretionary stocks

Consumer discretionary stocks have gained as the prospect of future rate hikes diminishes.

• Nick Scali: +1.51% to $11.41
• Domino's Pizza: +1.52% to $53.50
• Super Retail Group: + 0.83% to $13.43

Banking sector

The big banks have fallen as the market ponders the probability of lenders passing on the RBA's full 25bp rate hike to mortgage holders, and as some of the gloss comes off Westpac's trading update.

• Westpac: - 2.42% to $21.39
• Macquarie: -1.40% to $159.39
• NAB: -1.07% to $29.03
• ANZ: -1.05% to $25.47
• CBA: - 0.35% to $100.70

Resources sector

A larger-than-expected fall in China's trade surplus to $56.53 bn in October from $77.71bn in September was unable to prevent gains for the iron ore giants.

• Rio Tinto: + 0.51% to $122.13
• Fortescue: + 0.39% to $123.33
• BHP: + 0.39% to $45.61

ASX 200 technical analysis

Last week's close above 6950 negated the technical damage following October's sell-off. If the ASX 200 can close above 7000, it will provide a platform for the ASX 200 to test the 200-day moving average at 7200, with scope to range highs at 7400.

ASX 200 daily chart

• _{Source Tradingview. The figures stated are as of 7 November 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.}