Diverging rate tracks of Fed, RBA in view

Diverging central bank rate tracks in the US and Australia are coming to the fore this week, with futures pointing to a soft start on Monday for the S&P/ASX 200 index when trading opens amid firm expectations that the Federal Reserve will cut its benchmark rate this week and forecasts for the Reserve Bank of Australia to start raising the target cash rate next year.

Stocks on Wall Street closed Friday higher with the Fed’s cuts buoying an increasingly calm market, while Netflix’s US$72 billion acquisition of Warner Bros Discovery’s studios and streaming businesses puts broadcasters and streamers such as Sky Network Television back in the spotlight.

Rocket Lab was the second-most bought security by Sharesies users on Friday after reports that Elon Musk’s SpaceX is preparing for a secondary share sale at a juicier valuation, stoking demand for other space companies.

Meanwhile, ASB Bank’s economists expect New Zealand’s economy to step up a gear in 2026, with the Reserve Bank’s monetary juice flowing through to increased consumer spending.

Muted Monday

Australian futures are pointing to a 0.2% decline for the ASX200 when trading opens across the Tasman as investors turn their mind to upcoming central bank meetings this week, which are expected to confirm the diverging rate tracks of the US and Australia.

The Federal Reserve is expected to cut a quarter-point from the federal funds rate to a range of 3.5%-to-4% when the federal open market committee announces its decision on Wednesday, with more easing predicted by the US central bank through 2026. Meanwhile, the Reserve Bank of Australia’s Tuesday review is predicted to keep the cash rate at 3.6%, with traders pricing in a move higher next year.

The kiwi dollar traded at 57.78 US cents at 7am in Auckland from 57.64 cents on Friday, and dipped to 86.96 Australian cents from 87.15 cents.

Other central banks reviewing policy this week include the Swiss National Bank and the Bank of Canada.

New Zealand’s Reserve Bank has an outside chance of another rate cut priced in through the start of 2026, with predictions for the latter half of the year projecting an increase in the 2.25% official cash rate.

ASB economists predict a stronger year for New Zealand’s economy in 2026, forecasting growth of 2.6% as the central bank’s rate cut cycle helps boost activity as more mortgages roll off their previous higher levels.

“Consumer spending is up, especially on big-ticket items like cars and electronics, and rural incomes are holding strong despite global uncertainty,” ASB Bank chief economist Nick Tuffley said in a statement. “With interest rates at their lowest in years, more New Zealanders are set to benefit as mortgages refix at better rates.”

Buoyant mood

Meanwhile, stocks on Wall Street were modestly higher on Friday, with the S&P 500 and Dow Jones Industrial Average both up 0.2%, while the tech-heavy Nasdaq Composite increased 0.3%.

Warner Bros Discovery jumped 6.3% after Netflix trumped Paramount SkyDance with its US$72 billion offer for the media group’s studios and streaming businesses, with the cable network arm spun out into a separate business. Netflix and Paramount were both weaker on the day, while NZX-listed Sky TV comes into view having retained its ‘outperform’ rating by Forsyth Barr’s analysts last week.

Space companies including EchoStar Corp were stronger after reports emerged that SpaceX is eyeing an US$800 million valuation in a secondary share sale and is mulling an initial public offering for 2026. Kiwi-born company Rocket Lab was the second-most bought US-listed security by Sharesies users on Friday, although it was a touch softer on the day.

Across the Atlantic, stock markets were mixed on Friday, with BP among those weighing on the UK’s FTSE 100, which fell 0.5%, after the oil major was downgraded by Bank of America analysts, along with Shell.

Germany’s DAX 30 gained 0.6% after chancellor Friedrich Merz secured a parliamentary majority for his pensions bill, while France’s CAC 40 dipped 0.1%.

There’s no local data scheduled for today, while annual meetings this week including Fonterra’s on Thursday.

Reporting by Paul McBeth. Image from Patrick Hendry on Unsplash.