Australia Briefing: RBA’s History of Caution

(Bloomberg) --

Hello Australia, it’s Jackie here and this is what’s happening around our region this morning:

Slow and Low?: Money markets reckon the RBA will respond to surging inflation with the most aggressive round of policy tightening since the 1990s, a trajectory that appears to conflict with Governor Philip Lowe’s history of caution. Lowe’s track record hasn’t stopped traders from pricing in 2.4 percentage points of rate increases by the end of 2022 — which would be the steepest annual pace since 1994 — including at least two jumbo hikes. Most traders and economists see a 15 basis-point move to 0.25% today.

Power Play: Mike Cannon-Brookes’s personal office bought 11% of AGL and will oppose the utility’s plan to demerge its retail and power generation assets under a proposal that would keep coal-fired plants running for decades. With the stake, the billionaire’s Grok Ventures becomes the company’s largest shareholder.

Tweet Storm: For all the furor about which way Elon Musk might tilt U.S. political discourse after getting the keys to Twitter, his biggest challenges may emerge across the Pacific.

Raising the Bar: New Zealand’s government will set a target for budget surpluses and introduce a new cap on debt that’s higher than previous limits, allowing greater investment in infrastructure. Surpluses will be kept within a band of 0-2% of gross domestic product over time, Finance Minister Grant Robertson said in a pre-budget speech Tuesday in Wellington.

What Happened Overnight

Bargain Hunters: U.S. stocks closed higher at the start of a week that’s likely to be marked by unnerving market gyrations, with the Federal Reserve expected to deliver its biggest rate hike in two decades. Dip buyers emerged after the worst month for the S&P 500 since the onset of the pandemic, sending the benchmark gauge up after a slide that reached 1.7% earlier.

More Market Angst: Citi’s London trading desk was behind a flash crash in Europe that sent shares across the continent tumbling after a sudden 8% decline in Swedish stocks. The selloff was triggered by a large erroneous transaction made by the U.S. bank’s London trading desk, according to sources.

Ukraine Latest: The EU will provide more detailed guidance in coming days on what companies can and can't do under sanctions rules to address Vladimir Putin's demands to pay for gas in rubles. At a meeting of energy ministers from the bloc, all member states indicated that they'll stick to guidelines on payment.

Expected Decline: Hong Kong's economy probably contracted in the first quarter as the city imposed tough curbs and the worsening outbreak in China disrupted trade to the financial hub. GDP may have fallen 1.3% from a year earlier, consensus shows. That would be its first quarterly contraction since the end of 2020.

What to Watch

• A majority of economists expect the RBA will raise interest rates for the first time since 2010
• Woolworths is set to release a sales update

One More Thing…

Bitcoin Banned: Your money's no good here — at least if you're paying in crypto. The Wikimedia Foundation, the non-profit organization behind Wikipedia, will stop accepting digital coin donations amid concern about their negative impact on the environment. The WMF will close its account on Bitpay, a crypto payment service provider, as well as its direct methods to accept cryptocurrencies as donations.

And with that, have a great day.

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