The Australian share market has lifted to its highest level in almost six months, with investors betting the Reserve Bank of Australia (RBA) will slow the pace of its upcoming interest rate hikes.
But across the ditch, the Reserve Bank of New Zealand (the RBNZ) has done the opposite.
The RBNZ announced its largest ever interest rate hike on Wednesday, and warning borrowing costs will "reach a higher level, and sooner than previously indicated".
The ASX 200 index closed 0.7 per cent higher, at 7,232 points.
The Australian dollar was buying 66.36 US cents, after slipping 0.2 per cent.
Bitcoin was relatively steady at $US16,470, after dropping to a two-year low yesterday. Its value has also plunged 63 per cent since the year began.
This aggressive cryptocurrency sell-off was sparked by central banks lifting rates at their fastest pace in decades, and a string of high-profile collapses in the volatile sector, including the recent bankruptcy of digital currency exchange FTX.
RBNZ's largest ever rate hike
The RBNZ lifted rates by 0.75 percentage points on Wednesday, bringing New Zealand's cash rate to 4.25 per cent, its highest in almost 14 years.
This is the ninth straight rate hike for the RBNZ, which flagged more rate increases are coming, as the nation struggles to contain stubbornly high inflation — currently at a three-decade high of 7.2 per cent.
New Zealand's central bank now expects the cash rate to peak at 5.5 per cent in September 2023, according to its monetary policy statement.
"Despite having hiked by 400 basis points [4 percentage points] since the beginning of the cycle, the MPC [Monetary Policy Committee] remains hawkish, as price pressures and capacity constraints remain very much alive in the economy still," Barclays economists Shreya Sodhani and Rahul Bajoria wrote in a client note.
"The bank now forecasts a shallow recession in 2023, but sees it as a necessary condition to achieve its remit."
In Australia, the RBA has strongly indicated it may slow down the pace of its future hikes, and favour smaller rate rises (0.25 percentage point). But that comes after rapid increases in the cash rate since May (from 0.1 to 2.85 per cent).
On Tuesday evening, the Reserve Bank governor Philip Lowe warned that borrowing costs will continue to rise, in a speech delivered at an economics conference in Melbourne.
Dr Lowe warned: “We have not ruled out returning to 50 basis point [0.5 percentage point] increases if that is necessary.
"Nor have we ruled out keeping rates unchanged for a time as we assess the state of the economy and the outlook for inflation."
Nomura senior economist Andrew Ticehust said the RBA "is attempting to keep the economy on an 'even keel' as it seeks to return inflation to target over time.
"While RBA Governor Lowe has set out a different approach, we think the messages from the New Zealand economy and from the RBNZ suggest upside risks around our forecast for the Australian cash rate to peak at 3.6 per cent."
Given Australia's cash rate target is currently 2.85 per cent, Mr Ticehurst is essentially predicting the RBA will announce three more rate increases (assuming it continues to hike by 0.25 percentage point increments).
Fortescue executive steps down after serious injury
Former Reserve Bank deputy governor Guy Debelle has stepped from his executive role at Fortescue Metals' green energy division due to injuries he sustained after a serious accident.
In a statement, FFI said Dr Debelle will no longer be its chief financial officer, but instead transition to a seat on its board.
"In August 2022, Dr Debelle was involved in a serious bicycle incident," the company said.
"Over the past few months, he has been recovering, while managing the demanding duties associated with his role as CFO, and has made the difficult decision to step back to be able to focus on his health.
"In his new role, Dr Debelle will focus on policy, regulatory and financial advisory, including the development of the Australian green energy market."
Dr Debelle's decision to step down as CFO comes months after he joined Fortescue. Before that, he had worked at the RBA for 25 years.
“I am, sadly, not in a position to give this role everything I know it deserves right now,” he said.
“It is a critical time for the green energy transition and we cannot slow down.”
Qantas and mining stocks soar
Shares of Qantas jumped 5.3 per cent to $6.18, making it one of today's best performing stocks on the ASX.
This was after the airline announced its second profit upgrade in six weeks, thanks to strong demand for domestic flights.
"Consumers continue to put a high priority on travel ahead of other spending categories and there are signs that limits on international capacity are driving more domestic leisure demand, benefiting Australian tourism," Qantas said in a statement.
Qantas is now expecting its first-half underlying pre-tax profit to be around $1.35 billion to $1.45 billion (up from its previous estimate of $1.2 billion to $1.3 billion).
A year earlier, the company recorded an underlying loss before tax of $1.28 billion.
Mining and energy stocks also rose sharply, including Chalice Mining (+6.5 per cent), Whitehaven Coal (+5.6 per cent), New Hope Corporation (+2.8 per cent), Evolution Mining (+2.4 per cent) and Beach Energy (+2.6 per cent).
However, technology stocks like Smartgroup (-2.9 per cent) and WiseTech Global (-6.7 per cent) suffered heavy falls, along with healthcare companies Imugene (-2.7 per cent) and Fisher & Paykel Healthcare (-1.8 per cent)
Wall St investors look past China lockdowns
On Wall Street, investors shrugged off news of China's renewed lockdowns in response to its surging COVID-19 infections.
The Dow Jones index closed 1.2 per cent higher at 34,098 points, while the Nasdaq Composite lifted 0.8 per cent to 11,174..
The S&P 500 gained 1.4 per cent to 4,004, its highest level since mid-September.
"We're seeing technology, consumer discretionary and energy leading downside momentum while consumer staples stocks are leading the upside," said Michael Ashley Schulman, chief investment officer at Running Point Capital in Los Angeles.
"These are signs of investors positioning for a downturn."
In China, authorities in Beijing shut parks and museums to contain a spike in coronavirus infections.
In Shanghai, rules were tightened for people entering the city as the country grapples with a spike in COVID cases, sparking worries about its impact on the economy.
Oil prices rise, as investors await interest rate clues
The price of crude oil jumped after Saudi Arabia said OPEC+ was sticking with output cuts and could take further steps to balance the market, outweighing global recession worries and concern about China's rising COVID-19 case numbers.
Brent crude futures rose 1.2 per cent to $US88.50 a barrel.
Safe-haven gold prices were flat at $US1,738 an ounce.
Meanwhile, global investors are keenly waiting the US Federal Reserve's minutes of its November policy meeting, which will be released on Thursday morning (AEDT).
At its November meeting, the Fed decided to lift rates by a supersized 0.75 percentage points, for a fourth straight month.
Markets are hoping the minutes may offer clues on how America's rate-setting officials view economic conditions — and by implication, how high or quickly US rates will rise.
ABC/Reuters
