Australian Stocks End Higher After RBA Minutes; New Zealand Inflation Slows

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The Australian share market finished higher on Tuesday, snapping a two-day losing streak, as investors parsed through the latest monetary policy meeting minutes from the Reserve Bank of Australia (RBA).

The S&P/ASX 200 index gained 0.42% to close at 7,056.10 points. The rebound was broad-based, with 7 of the 11 sectors ending in positive territory. The information technology sector was the best performer, surging 1.8%. Financial and consumer staple stocks also recorded notable gains.

The rally came after the RBA released the minutes from its October policy gathering, providing insights into its decision to keep interest rates unchanged. The central bank has now left the official cash rate steady at 2.60% for four straight months, taking a wait-and-see approach as it evaluates the impact of its aggressive tightening cycle.

“Members agreed that it was appropriate to maintain the current policy setting while continuing to monitor how the global and domestic economies were evolving,” the minutes stated. However, the RBA reiterated that inflation still remains too high despite some tentative signs of moderation.

Across the Tasman Sea, New Zealand’s consumer price index increased 5.6% in the third quarter from a year earlier, slowing from a 6.0% rise in the preceding quarter, Statistics NZ data showed. Nevertheless, inflation continues to hover above the central bank’s 1–3% target band. In reaction, the Kiwi dollar dipped 0.39% against its American counterpart.

Elsewhere in the region, Japan’s Nikkei 225 index climbed 0.98% to finish at 32,014, boosted by a weaker yen and upbeat corporate earnings. South Korea’s KOSPI benchmark gained 1.08% on the back of strong trade numbers. Hong Kong’s Hang Seng Index rose 0.78%, aided by a rebound in technology stocks.

On Wall Street overnight, the Dow Jones Industrial Average surged 417 points or 1.3%, posting its best day since mid-September. The S&P 500 advanced 1.1% while the tech-heavy Nasdaq Composite rallied 0.9%, as investors pivoted back into growth shares.

“The backdrop for equities remains challenging, however, with macro uncertainty still abundant and earnings estimates still too high,” cautioned Mark Haefele, chief investment officer at UBS Global Wealth Management. “Nonetheless, lower valuations on equities help cushion the impact of an economic slowdown.”

Looking ahead, investor focus will stay trained on inflation and interest rates. Markets are betting that the U.S. Federal Reserve will deliver another 75 basis point rate hike in November, followed by a 50 basis point increase in December. However, some analysts believe the Fed could start slowing the pace of hikes sooner if price pressures continue easing.

“We see space for a positive run in risk assets into the year end,” said Mark Haefele, noting that UBS expects the S&P 500 to reach 4,500 by mid-2023, representing a 10% upside from current levels.

In the commodities sector, oil prices treaded water as demand concerns linked to a potential recession capped gains. Brent crude futures dipped 0.2% to $93.26 per barrel, while U.S. West Texas Intermediate crude edged 0.1% lower to $85.32.

Gold prices climbed 0.4% to $1,654 an ounce, recouping some losses after falling more than 1% in the previous session. The U.S. dollar index was largely flat at 112.29. Bitcoin rebounded back above the $19,000 mark after plunging below $18,500 on Monday.

For rolling coverage of major Asia-Pacific markets, visit CNBC’s Asia-Pacific live blog. Coming up on CNBC Pro: Analysts reveal their favorite small-cap stock picks.

Full Details on RBA’s Latest Policy Meeting

The RBA’s 58-page monetary policy meeting minutes provided insights into the central bank’s thinking around its decision to keep the cash rate steady at 2.60% in October. This marked the fourth consecutive month it held fire after a record pace of hikes earlier in the year.

The RBA noted that inflation remained too high at 6.1% in the third quarter, despite tentative signs of moderation. Policymakers reiterated they expect inflation to peak later this year before gradually declining to around 3% in 2023 and 2.5% in 2024.

Members agreed more policy tightening will be required over the months ahead to ensure inflation returns to the 2–3% target range. However, they decided to maintain rates at the October meeting to monitor the lagged effects of previous hikes.

The RBA expects the full brunt of its 300 basis points worth of rate increases to become evident in mortgage payments and spending decisions over the coming months. Members noted this would help ease capacity pressures in the economy and reduce inflationary pressures.

Policymakers also noted the housing market has cooled significantly due to higher borrowing costs and weakening sentiment. However, they believe the extent of the housing downturn will be less severe than previously feared.

On the global front, the RBA observed that inflation remains high across most advanced economies, prompting central banks to continue tightening monetary policy. Members noted that financial conditions have tightened as a result, increasing risks to the economic outlook.

The minutes highlighted concerns around a loss of momentum in global trade due rising inflation, higher interest rates and energy costs. Members also pointed to China’s weakening economy amid ongoing COVID restrictions and property sector woes.

New Zealand Inflation Eases in Q3, Kiwi Dollar Declines

New Zealand’s consumer price index (CPI) rose 5.6% in the third quarter from a year earlier, slowing from a 6.0% increase in the April-June period, according to Stats NZ data published on Tuesday.

The inflation figure landed slightly below market forecasts of 5.7% growth. Nevertheless, it remains well outside the Reserve Bank of New Zealand’s (RBNZ) 1–3% target band.

On a quarterly basis, CPI climbed 1.4% in Q3 after rising 1.7% in the preceding three month period.

The large yearly increase continued to reflect higher prices for construction, rentals, food and utilities. Transport costs rose 15% from a year ago, though petrol prices fell 2.4% in the quarter.

In reaction to the softer-than-expected inflation print, the New Zealand dollar dipped to $0.5903, extending declines after the data release. The Kiwi has dropped over 10% against the greenback so far this year.

While inflationary pressures showed signs of moderating, analysts said the data supports the case for the RBNZ to continue raising interest rates, albeit at a slower pace. Markets are pricing in a 75 basis point rate hike at the central bank’s November meeting.

“There are hints of a slowdown in inflation pressures, but this won’t stop the RBNZ from hiking the OCR further over coming months,” said Jessica Pointon, economist at Capital Economics.

Asian Stocks Rebound as Investors Hunt for Bargains

Stocks across Asia rebounded strongly on Tuesday as investors returned to pick up beaten-down shares following the recent market rout.

Japan’s Nikkei 225 index jumped 0.98% to close at 32,014.65, recovering some ground after falling nearly 1% in the previous session. The broader Topix index finished 0.57% higher.

Overnight, the Bank of Japan maintained its ultra-loose monetary policy stance, vowing to continue stimulus until inflation hit its 2% target in a sustainable manner. The decision caused the yen to weaken further, supporting Japanese exporters and lifting equities.

In Hong Kong, the Hang Seng Index climbed 0.78% to 17,777. The rebound came even as trading resumed in shares of some Chinese developers after a holiday break. Sentiment was aided by a rally in Chinese tech giants listed in the city.

South Korea’s KOSPI benchmark rose 1.08% to 2,463 after the country reported stronger-than-expected trade data for the first 20 days of October.

Mainland Chinese markets also shook off early losses, with the Shanghai Composite Index finishing 0.18% higher at 3,079. Hong Kong-listed shares of Chinese developers outperformed as concerns over debt troubles eased slightly.

Across Southeast Asia, Singapore’s FTSE Straits Times Index gained 0.11% and Indonesia’s Jakarta Composite advanced 0.4%.

Analysts noted that valuations across the region have become more attractive after the recent sharp drawdown, prompting traders to buy on dips. However, they cautioned that macroeconomic headwinds persist.

“While risks remain, we believe Asian equities can trend higher into year-end,” HSBC analysts wrote in a research note. “Stock valuations appear reasonable while earnings revisions trends have steadied.”

Wall Street Extends Rally as Growth Shares Rebound

U.S. stocks built on last week’s rally, with all three major indexes finishing solidly higher overnight amid a recovery in growth and technology stocks.

The Dow Jones Industrial Average jumped 417 points, or 1.3%, to close at 31,499 — its strongest performance since mid-September.

The S&P 500 advanced 1.19% to end at 3,797, while the tech-heavy Nasdaq Composite rallied 1.27% to 10,952.

The gains were broad-based, with all 11 S&P 500 sectors finishing higher. Stocks that were battered in the recent selloff, including megacap growth names, outperformed on Monday.

Apple shares rose 1.9%, Microsoft climbed 1.7%, Amazon added 3.5% and Meta Platforms surged 5.7%. The rally in growth stocks came as Treasury yields declined, easing pressure on valuations.

Investors rotated back into equities ahead of another heavy week of earnings. Reports from Microsoft, Alphabet, Meta, Apple and Amazon will help show whether tech firms can weather an economic slowdown.

Overall, market sentiment was lifted by hopes that the Fed may slow its monetary tightening pace if inflation continues to cool. The Dow’s 417 point jump marked its largest one-day gain since September 13.

“While risks remain, we believe stocks have further upside into year-end,” said Mark Haefele of UBS Global Wealth Management. He noted that lower valuations help cushion stocks against an economic downturn.

Still, analysts cautioned volatility will persist amid lingering macro uncertainty. “The backdrop for equities remains challenging, however, with macro uncertainty still abundant,” said Haefele.

All eyes now turn to economic data this week, including third-quarter GDP figures, personal consumption expenditures inflation, and the Fed’s favored core PCE price index. The readings will shape expectations for the Fed’s upcoming policy decisions.

For continuous real-time coverage of the U.S. stock market, keep visiting American Money.

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