Undecided investors await US Fed move
The benchmark S&P/ASX 200 Index was down 11.5 points, or 0.24 per cent, at 4814.4. The broader All Ordinaries Index was down 10.4 points, or 0.22 per cent, at 4794.6.
The market fell nearly 1 per cent during the day, in line with falls on Asian markets and after the minutes from the latest Reserve Bank board meeting provided little guidance.
But data showing strong rises in Chinese property prices helped the market recover some of its losses during afternoon trade.
IG strategist Chris Weston said investors were sensitive before the US Federal Reserve’s policy board meeting being held on Wednesday.
US Fed chairman Ben Bernanke is tipped to provide direction on whether policymakers will continue with a monthly $US85 billion bond-buying program, known as quantitative easing.
Bond futures prices were slightly higher with a small rally after the release of the RBA minutes.
The RBA kept the cash rate unchanged at a record low of 2.75 per cent two weeks ago but the minutes of the policy meeting showed that it was still inclined to reduce the rate if inflation stayed low and growth in the non-mining sectors of the economy became sluggish.
‘‘The RBA obviously kept the view there was scope to ease rates should that prove necessary,’’ Westpac interest rate strategist Tim Jung said. ‘‘We don’t think there is a whole lot in there for the market to change its expectation of what the RBA will deliver.’’
The September 10-year bond futures contract was trading at 96.600 (implying a yield of 3.400 per cent) after peaking at 96.640, up from 96.595 (3.405 per cent) on Monday. The three-year contract was at 97.440 (2.560 per cent), up from 97.435 (2.565 per cent).
Recent economic data has shown signs that the US economic recovery is getting more solid, raising the possibility that the Fed would start to wind back its quantitative easing, Mr Jung said.
‘‘The obvious thing to look for is the tapering of their QE program,’’ he said.
‘‘Any indication of the size and also the timing of the tapering will be crucial to near-term price action.’’
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The ASX sharemarket slipped because investors were cautious ahead of the US Federal Reserve policy meeting. Uncertainty over whether the Fed would continue its monthly US$85 billion quantitative easing program made traders sensitive, contributing to intraday falls aligned with declines in Asian markets.
On the day reported, the S&P/ASX 200 was down 11.5 points (‑0.24%) at 4,814.4, while the All Ordinaries Index fell 10.4 points (‑0.22%) to 4,794.6.
Stronger-than-expected rises in Chinese property prices helped the market recover some losses during afternoon trade, providing a positive influence that partially offset earlier weakness tied to global stimulus uncertainty.
The RBA minutes showed the bank kept the cash rate unchanged at a record low of 2.75% but remained open to easing further if inflation stayed low and non‑mining growth slowed. Market reaction was muted because strategists felt there wasn’t much new information to change expectations about future RBA action.
Bond futures rallied slightly after the RBA minutes: the September 10‑year contract traded at 96.600 (implying a 3.400% yield) and the three‑year contract at 97.440 (2.560%). These moves matter because bond prices and yields reflect expectations for interest rates and monetary policy, which influence equity valuations and investor decisions.
IG strategist Chris Weston noted investors were particularly sensitive before the US Federal Reserve policy meeting. Westpac interest rate strategist Tim Jung added that recent US economic data raised the possibility the Fed could start tapering its quantitative easing, and that the timing and size of any tapering will be crucial for near‑term price action.
Tapering refers to the Fed reducing the size of its monthly bond‑buying (quantitative easing) program. Everyday investors should watch it because any clear indication of the timing or size of tapering can affect bond yields, stock market sentiment and near‑term price movements across global markets.
The article highlights US economic data and Fed guidance on quantitative easing as key indicators, along with RBA commentary on inflation and non‑mining sector growth, and Chinese property price data — all of which influenced market direction on the day described.
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