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Chapter 1: What is the main topic discussed in this episode?
A listener production. The Aussie market takes a breather a day after hitting a near four-week high. And the RBA keeps rates on hold, but what could be next for interest rates? Good afternoon, I'm Steve Daglian. It's Tuesday the 16th of June. Welcome to the CommSec Market Update.
Chapter 2: What recent trends are observed in the Australian share market?
Well, good afternoon, everyone. Hope you've had a great day. The Aussie share market must not be flattered today. The ASX 200 is up by around three points. That is a lift of about 0.04% as we approach the close. Certainly recovering from the worst levels of the day, though. We were down almost 1% a little earlier.
The US market did actually hit a record high last night, or at least closing record highs for the Dow Jones market. and that was thanks to the preliminary US-Iran deal, which was announced yesterday morning. Something to keep in mind here is that our market yesterday was one of the first globally to react to the news of that interim US-Iran deal.
And it was a reason why we already had one of our strongest back-to-back gains of the entire year for the ASX 200. So it very much was a case of our share market taking a little bit of a breather today. So giving you some numbers there, the ASX 200 rose by 1.25% yesterday, and that was on the US-Iran interim deal. And then by 2% last Friday, on the hope of there being a deal.
So we did hit a near four-week high yesterday, and we're getting close enough to a record high in the past couple of sessions as well. And I think also, On the one hand, certainly there's some excitement around an interim deal after three and a half months of conflict, which could include the potential reopening of the Strait of Hormuz later this week.
But I think markets are just slightly nervous. There are still risks and markets perhaps not getting too far ahead of themselves, considering the pact has not officially been signed yet. That's going to be done this Friday, or at least that's what's expected in Switzerland. And then a more expansive agreement is
which could cover off some of those key sticking points, which have been difficult for the US and Iran to actually agree on, that's going to be negotiated during a 60-day ceasefire period. And we know that a lot can change over a two-month span. Now, we've also got to touch on the Reserve Bank today because it decided to keep interest rates on hold at its official meeting.
This was very, very widely expected. In fact, it was a unanimous vote by the Reserve Bank as well today. 31 economists were surveyed by Bloomberg on this, asking them what they thought would happen. And 30 of them were expecting rates to be kept on hold. There was just one economist out there that thought a rate hike was most likely.
Now, the reason why markets thought it was likely is that it followed three consecutive rate hikes. We had an interest rate hike in February, then another one in March, and then another in May. So that has really given the Reserve Bank breathing room and just time to pause and step back and just to see how things unfold from here.
Also over the past six weeks, and that was the last time the Reserve Bank met in early May, a lot of the economic data that's been handed down has been a little on the weak side.
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Chapter 3: What impact did the US-Iran interim deal have on the ASX?
And that's included things like jobs growth, We had the unemployment rate ticking higher. Economic growth missed expectations. Household spending dropped in April too. We had home prices showing signs of declining. At the same time, consumer confidence has been pretty weak.
So last week, we had an update from Westpac, a consumer confidence survey, and they basically said that sentiment is near the weakest it's been in the 50-year history of this survey being conducted.
Yes, at the same time, news broke yesterday that the US and Iran reached that interim deal, but the Reserve Bank did acknowledge that the resolution of the conflict is welcome and it's good news, but it's still at an early stage. They also pointed out that global oil supply issues are going to take some time to resolve. That could mean upward pressure on energy prices and inflation.
Overall, on balance, I think the market's response was relatively positive. We did see a bit of a tick up from where our market was before the decision was handed down. And we are a long, long way out now from the next Reserve Bank meeting. We are going to need to wait eight full weeks before the RBA is going to make its next decision. And that 60-day period
for the US and Iran to reach a more expansive deal, the end of that period is basically going to land just a week after that next interest rate decision. So a lot can happen between now and then. And we'll also have, of course, plenty of data on inflation, on jobs and more that markets will likely respond to.
Also a bit earlier today, we had the Bank of Japan raising interest rates by a quarter of a percent to 1%. That's the highest that rates have been in Japan in 31 years, but that was widely expected by the market. So we did see the Japanese yen strengthening against most currencies this afternoon, and that includes the Aussie dollar. And I will also just touch on China's monthly data dump.
So every month, most of the key numbers for our largest trading partner is released at one hit. And that's what we saw today at around midday Sydney time. This is for the month of May. Now, data was mixed, but basically one of the things that stood out was a larger than expected dip in consumer spending. In fact, it was the first contraction in spending since the pandemic in China.
Investment in China's economy also on the soft side, softer than expected. And the property market is still quite sluggish at the moment. Now, the Aussie market did dip a bit for about half an hour or so once the data was handed down, but it was pretty quick to recover and on balance didn't have a huge impact on local stocks. But let's look at sectors today because we've had a mixed bag.
And I think something to keep in mind when we look at these movements is that it's got to be put into context compared to what happened yesterday. because we had some really significant movements in both directions on Monday. And that was in response to the knee-jerk reaction, I guess, to that interim US-Iran deal. So for example, today, energy stocks were the standouts, lifting about 1.1%.
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