RBA’s Inflation Concerns and Shaky Chinese Economy Impact Markets

Today, the banks proved to be the only bright spot on the screen as the broader market faced a downturn due to ongoing concerns about the Chinese economy.

• The sentiment in the Chinese market was not aided by the property developer giant, Evergrande, which registered a staggering loss of $119 billion.
• The market has been anxiously awaiting a stimulus announcement from the People’s Bank of China (PBoC) throughout the week. However, no such announcement has yet been made, leading to a sense of nervousness among investors who had speculated based on this expectation.

In economic news, the RBA’s latest minutes offered key insights:

• Despite recent declines, inflation remains high, driven by costs like electricity and rent. This and a tight labor market might fuel price and wage increases.

• Housing prices are climbing, with mortgage payments reaching a historical high in May.

• Amid economic uncertainties, the Reserve Bank Board opted to leave the cash rate at 4.1%.

• Future policy might need tightening to control inflation, pending a reassessment in August.

Given these factors, the RBA remains committed to interest rate hikes if inflation continues, which impacted the consumer discretionary sector.

On the corporate front:

• Ansell reported a disappointing quarterly update. The global healthcare hygiene giant continues to grapple with inventory management challenges.
• In contrast, Lithium stocks swam against the current in the materials sector. Producers such as AKE and PLS managed to achieve a small positive day.

The focus now shifts to the US bank earnings to be released tonight, and the impending Tesla and Netflix results due tomorrow night.