US stockmarkets fell 3.3 per cent last week – the third consecutive week of falls – over concerns that aggressive central bank rate hikes may lead to recession.
Australia’s ASX200, one of the few major stockmarkets to finish August in positive territory, capitulated to close 3.9 per cent lower for the week on Friday.
Most of the damage was done late in the week on fears about new lockdowns in China.
Here is a review of the top five things to watch in markets this week:
1. RBA to raise rates by 50 basis points
The Reserve Bank of Australia board meets on Tuesday afternoon and is widely expected to raise the cash rate.
We believe the RBA will likely deliver a fourth consecutive 50-basis point rate hike, taking the cash rate to 2.35 per cent and heaping more pain on mortgage holders.
You can read more about our thinking behind this here.
2. June quarter Australian GDP
The June quarter GDP is in focus this week, especially because it coincided with the start of the RBA’s rate-hike cycle in May.
Strong consumer spending and net export growth are expected to offset weakness in housing and inventories, and we look for a number just above 1 per cent quarter on quarter.
3. Europe to raise rates by 75 basis points
Hawkish European Central Bank speak, and a record inflation reading last week (up 9.1 per cent year on year for August), have raised expectations that the ECB will opt for a supersized 75-basis point rate hike when it meets on Thursday, taking its key rate to 1.25 per cent.
4. Bank of Canada to raise rates by 75 basis points
At its previous meeting, the BOC surprised markets by hiking 100-basis points, as it noted inflation had become more persistent than expected.
The Canadian central bank is expected to follow this up with a 75-basis point rate hike when it meets on Wednesday, taking its key rate to 3.25 per cent.
5. When will Russia reopen the Nord Stream pipeline?
The Nord Stream pipeline that supplies Russian gas to Germany and other European nations was shut down last week for three days of ‘‘maintenance’’.
Russian energy corporation Gazprom announced over the weekend that the pipeline will be closed indefinitely as Russia continues to weaponise energy supplies and hamper efforts to secure supplies for winter.
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