ASB changes tack on RBNZ rate outlook; Wall Street gets mixed signals

ASB Bank economists have changed their view on the path of local interest rates, and now expect the Reserve Bank will keep the official cash rate at 2.25% at next month’s policy review after the recent slide in oil prices.

Tech stocks on Wall Street were mixed heading into the close as price hikes by Apple cast a long shadow over the cohort of megacap stocks, even as Micron Technology’s stellar quarterly earnings calmed frayed nerves about the pace of spending on artificial intelligence infrastructure.

The more subdued tone in the US followed an upbeat session in Europe where Bayer’s win in the US Supreme Court over its Roundup weedkiller buoyed healthcare stocks, setting an upbeat lead for the likes of Fisher & Paykel Healthcare and Ebos Group.

Australian futures are pointing to a mildly positive opening for the resources-heavy ASX when trading opens across the Tasman after gold prices climbed back above US$4,000 an ounce.

When the facts change

ASB economists joined their Westpac counterparts in predicting another pause by the Reserve Bank at next month’s policy review as the ceasefire between the US and Iran and subsequent slide in oil prices cooled domestic inflation fears.

The bank’s economists predict the central bank will start hiking the benchmark rate from September, lifting it to 3% by the end of the year and peaking at 3.25% in 2027.

“This is conditional on our reading of the current outlook that assumes the OCR needs to get back to a more neutral level at some point over the next year,” ASB senior economist Mark Smith said in a note. “In this gyrating environment the range of risks is spread across an earlier start and still-rapid tightening through to a more gradual pace of increases to a more moderate peak.”

The kiwi dollar traded at 56.50 US cents at 7am in Auckland from 56.48 cents yesterday.

Westpac’s changed call provided a tailwind to the S&P/NZX 50 index yesterday, which gained 0.7%.

Stocks on Wall Street were sending a mixed signal for the antipodes as Apple’s price hikes for Mac and iPad products on soaring chip costs weighed on the iPhone maker, which was down 5.5% in late trading. That weighed more broadly on the other Magnificent 7 megacap stocks, including Nvidia, Microsoft and Amazon, and offsetting gains for AI-related companies buoyed by Micron’s stronger-than-expected quarterly earnings. Micron surged 15% in late trading.

Mixed fortunes

The Nasdaq Composite was down 0.4% in late trading, while the S&P 500 nudged up 0.1% and the Dow Jones Industrial Average rose 0.2%, with Caterpillar, Merck & Co and UnitedHealth Group leading the blue-chip index higher.

US rental campervan operator Winnebago surged 14%, even as it cut its earnings outlook on a tough retail environment. The company said motorhome RV sales and profitability were improving, while demand for towable RVs was muted.

Healthcare companies rallied after Germany’s Bayer surged 19% on a victory in the Supreme Court limiting thousands of lawsuits over the required warning labels on the company’s Roundup weedkiller.

Bayer led gains on Germany’s DAX, which jumped 1% across the Atlantic, while France’s CAC 40 rose 0.4% and the UK’s FTSE 100 was up 0.7%.

Gold futures rose 1.1% to US$4,051/oz, ending its recent slide and providing a strong lead for Australia’s market, with futures pointing to a 0.1% gain for the S&P/ASX 200 index when trading opens across the Tasman.

Greg Boland, market strategy consultant at Moomoo, said New Zealand’s stock market would likely open modestly stronger as the Micron result eased fears about the pace of AI investment.

“With Micron's earnings restoring confidence in AI spending, ASX 200 futures pointing higher and semiconductor stocks rallying overnight, the NZX is expected to open modestly firmer, although investors are likely to remain selective as inflation and geopolitical risks continue to influence global markets,” Boland said in a note.

No major local data is scheduled for today.

Reporting by Paul McBeth. Image from Curious News.