PEAK ASSET: MORNING WRAP 4 May: ASX 200 futures are pointing down to a 23-point, or 0.26 per cent, drop to 8727 | ASX to slide as investors await crucial RBA decision | Lithium top dog again in April as sentiment turns for battery metals |

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Market Highlights

ASX 200 futures are pointing down to a 23-point, or 0.26 per cent, drop to 8727.

• AUD at US72¢
• Bitcoin –0.68 per cent to $US78,150
• On Wall St: Dow -0.3% S&P 0.3% Nasdaq 0.9%
• VIX +0.59 per cent to 16.99
• Gold +0.4 per cent $US4,625 an ounce
• Brent crude oil +1.03 per cent to $US109.20 a barrel
• Iron ore +0.16 per cent to $107.86 per tonne
• 10-year-yield US 4.379 per cent Australia 5.025 per cent

Across Markets…

The Australian sharemarket is set to slide on Monday ahead of the Reserve Bank of Australia’s latest board meeting, where investors have tipped a third consecutive cash rate rise and will be watching for clues on how much more tightening the central bank expects over the remainder of the year.

Futures on the S&P/ASX 200 pointed to a 23-point – or 0.26 per cent – drop when the Australian bourse opens on Monday morning, having closed eight of the last nine trading days down.

The continued weakness comes even as Wall Street grinds to new highs, with both the Nasdaq and the S&P 500 resetting their records on Friday (Saturday AEST), rising 0.9 per cent and 0.3 per cent respectively on strong results from technology giants.

While Friday’s 0.7 per cent advance gave investors a brief reprieve from the ASX’s longest losing streak since 2018, Emanuel Datt, chief investment officer at Datt Capital, said he expected the market to continue to weaken this week ahead of the RBA’s cash rate decision.

“As we’ve seen, it’s been a little bit of attrition each day over time,” he said. “We’re experiencing high inflation, rising cash rates, with the RBA due to announce [their monetary policy decision] as well this Tuesday. So we think the market will take a cautious approach to all of that.”

Bond markets have priced in an 83 per cent chance of a rate rise next week, with a move up fully priced by June. Assuming the next rate rise is of the same magnitude as the last two, that would take the cash rate to 4.35 per cent – still below the 4.7 per cent rate the market has priced in by year-end.

That means traders are pricing in between two and three more rate increases between now and Christmas. But those bets could rapidly shift on any sign of increasing hawkishness from governor Michele Bullock when she speaks after Tuesday’s decision.

Ten Cap founder and portfolio manager Jun Bei Liu said the fact that price increases were being rapidly passed onto consumers by companies was a sign that demand could still be running too hot in the Australian economy, creating concern that the case for three increases could be firming up.

“Right now, the market is saying one interest rate increase this week, one in August, and potentially one more,” she said. “We just hope it doesn’t eventually have to be three, right? Because that will put a pretty steep brake on our economy.”

Source: AFR