Daily Market Outlook, April 04, 2023

RBA Tap The Breaks On Rate Rises

Asian equity markets traded with a mixed tone, with some centres carving out modest gains, the upside was capped given the the choppy action seen on Wall Street, where manufacturing data indicated a further retreat in inflationary pressures and a softening in labour tightness, this led US investors to hit the buy button, but buyers remorse soon set in and markets duly retreated before retesting the highs into the close of trade, some of this choppiness may have been associated with new quarter and month flows adding late support. Overnight, as expected the Reserve Bank of Australia tapped the breaks on rate rises but left the door open to future moves.

European investors will be focused on this morning's European Central Bank’s consumer expectations survey which will provide a timely update on how inflation trends are developing, given last month’s reading where participants indicated declines in both 12 and longer term expectations, with a further retreat in energy prices of late investors are expecting a further softening in expectations. There is no data of note on the docket in the UK today, UK investors instead will eye comments from a couple of prominent Bank of England policymakers, firstly Silvana Tenreyro, who voted against each of the last three interest rate hikes, and so seems likely to point to downside risks for growth and inflation. The other is the BoE’s Chief Economist Pill who has always voted with the majority. Investors will parse their comments for any concerns regarding recent developments in the banking sector leading to a potential shift in policy. Stateside, US factory orders are expected to show a softening of 0.3% in February, given durable goods orders, which is about 40% of the total, showed a decline of 1.0% due to another fall in the volatile transport sector, this will likely be countered by non-durable orders which are expected to have seen a rise in demand for the second consecutive month, as with most developed economies the manufacturing sector continues to lag the buoyancy seen in the services sector which has been the main culprit for much of the inflationary pressure of late.