ASX to trade cautiously ahead of Reserve Bank's rate hike, Dow Jones posts biggest monthly surge in 47 years

The Australian share market is likely to start its day practically flat, as investors await the Reserve Bank’s latest interest rate decision.

Most economists are anticipating a 0.25 percentage point increase, which would bring the RBA’s cash rate target to 2.85 per cent.

However, there is a one in four chance the central bank might opt for a larger 0.5 percentage point hike, according to Reuters-polled economists — particularly after the latest ABS figures showed inflation rising at its fastest pace in 32 years.

ASX futures were steady at 6,858 points by 7am AEDT.

The Australian dollar was buying 64 US cents after slipping by 0.2 per cent.

Property prices continued to retreat in October, with the nation’s median price dropping another 1.2 per cent to $721,018, the latest CoreLogic data revealed.

Prices fell in every capital city — and nearly every region as well — as the 2.5-percentage-point increase in rates by the RBA since May began to bite. 

Wall St slips ahead of Fed decision

A weak performance on Wall Street appears to be weighing on local investor sentiment.

The Dow Jones, S&P 500 and Nasdaq Composite fell by 0.4, 0.8 and 1 per cent respectively.

US stocks fell overnight as investors traded cautiously ahead of the Federal Reserve’s interest rate decision, which will be announced on Thursday morning (AEDT).

The Fed is widely expected to raise interest rates by 0.75 percentage points, but investors will look for any clues the US central bank may slow the pace of its future rate hikes.

Hopes the Fed may pull back from its aggressive interest rate hike policy have lifted stock markets in recent weeks, with the S&P notching a gain of nearly 9 per cent over the past fortnight.

The Dow recorded its biggest monthly gain since January 1976, after jumping 14.1 per cent in October.

Shares of Apple dropped 1.5 per cent after a Reuters report said production of its iPhones could slump by as much as 30 per cent next month due to tightening COVID-19 curbs in China.

European inflation hits record high

Europe’s STOXX 600 index rose 0.4 per cent, after the latest inflation data showed consumer prices climbing at a record pace in October.

Consumer price growth in the 19 countries sharing the euro accelerated to 10.7 per cent last month (up from 9.9 per cent a month earlier), heaping pressure on the European Central Bank (ECB) to keep raising interest rates.

The ECB doubled its deposit rate to 1.5 per cent last week and promised more tightening in the months to come even if it pushed the bloc into recession.

Investors will also look towards a Bank of England policy meeting later in the week, with bets running high of it not budging from its similarly hawkish stance.

Spot gold fell 0.5 per cent to $US1,633 an ounce.

On oil markets, Brent crude futures dropped 1 per cent to $US94.83 a barrel.

ABC/Reuters

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