US stockmarkets fell for a seventh consecutive week on concerns about interest rate hikes, cost pressures and supply disruptions, making this year the worst start to the year for US equities since the 1970s.
The ASX200 closed the week 1 per cent higher at 7145, supported by upbeat RBA meeting minutes, resilient commodity prices and a fall in the jobless rate to the lowest level since 1974.
Here are the top five things to watch in markets this week.
1. Post-election relief rally for the ASX200
After the ALP claimed a majority in the weekend’s election and with the uncertainty of a hung parliament removed, the ASX200 stands a good chance of a relief rally as money managers who have been on the sidelines ahead of the election put cash to work.
2. RBNZ to raise interest rates again
The Reserve Bank of New Zealand is expected to raise the official cash rate by another 50 basis points to 2.00 per cent at its meeting tomorrow.
The RBNZ believe that aggressive rate hikes now will reduce the need for a longer tightening cycle and a higher terminal rate than otherwise would be needed.
3. FOMC meeting minutes
The minutes of the May FOMC meeting, where it raised rates by 50 basis points to 1 per cent and said that a 75 basis-point increase is something they are not actively considering, are expected to give more clues to the Fed’s tightening path.
4. Has the US dollar peaked?
The US dollar index, the DXY, fell 2 per cent last week on growing concerns about a US recession and whether the US dollar should continue to outperform other safe-haven currencies, including the Swiss franc and the Japanese yen.
5. Has gold bottomed?
Gold closed higher at $1846 for the first time in five weeks, supported by a retracement in the US dollar and US yields.
This sets the scene for a possible rebound in the yellow metal back to resistance $1880/1900 area.
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