Another big week awaits ASX shares and their investors.
Here are the three biggest things to keep an eye on, according to eToro market analyst Josh Gilbert:
1. Reserve Bank board meeting minutes
Many investors, and indeed much of the general public, will be interested in the discussions that led to a 12th interest rate hike earlier this month.
According to Gilbert, the Reserve Bank’s hawkishness this year has caught many stock investors off-guard.
“The S&P/ASX 200 Index (ASX: XJO) has come under pressure, with investors being left wrong-footed after expecting rate cuts by the end of 2023,” he said.
“This week’s meeting minutes should provide investors with further insight into the boardās decision to raise the cash rate when most economists felt the cash rate should stay on hold.”
The minutes will be released on Tuesday.
The “key takeaway” from the rate rise two weeks ago, Gilbert said, was that “the door is still open for more hikes if required”.
“Interest rates may still have further to go as the RBA pointed towards upside risks to inflation.”
Last week’s unemployment rate, which actually went down after 76,000 new jobs were added in May, gives the central bank further ammunition to hike again.
“The stronger-than-expected jobs dataā¦ will spark fears of further wage increases and prolonged inflation.”
2. China to cut interest rates?
The world’s second-largest economy is in the opposite predicament to western nations.
Deflation is a major worry and the anticipated post-lockdown economic revival has yet to take off.
Last week, the People’s Bank of China cut some of its minor policy rates, and the market is waiting to see if the main borrowing interest rate will see the same fate.
If the main rate is reduced, some ASX shares could boom.
“This will be good news for Chinese stocks, which climbed this week after the cut and local stocks exposed to China, such as BHP Ltd (ASX: BHP), Fortescue Metals Group Ltd (ASX: FMG) and Rio Tinto Ltd (ASX: RIO),” said Gilbert.
“Although more cuts are on the horizon, policymakers still have plenty to do in order to shift this recovery into first gear, particularly direct support to the property sector.”
3. Could artificial intelligence help the economy?
According to Gilbert, there are only two ways that economies can grow: either add in more people or each person produces more.
“Despite tech advances over the years, productivity has been stagnant or grown slowly, and in Australia, this has been flagged by the RBA as a key concern in recent months when handing down their interest rate hikes.”
So artificial intelligence coming along to boost productivity could be just the shot in the arm economies needed.
“It’s also good for markets, with eToroās latest Retail Investor Beat demonstrating that 58% of Australians are looking to maintain or increase their investment in sectors that stand to benefit from AI.”
Of course, there will be downsides as some jobs become redundant.
But it’s all part of the same evolution seen in history.
“The good news is, like any industrial breakthrough, new industries and jobs will be created, which will open up plenty of opportunities,” said Gilbert.
“After all, most job types today did not exist fifty years agoā¦ the transition can cause tension as businesses and employees move quickly to adapt.”
