Australia shares fall as central bank rises again; Asia markets are mixed

The Reserve Bank of Australia again defied market expectations and raised its benchmark interest rate to 4.1%.

Economists polled by Reuters largely expected the central bank to keep interest rates stable.

The Australian dollar rose 0.73% to 0.6667 against the US dollar shortly after the decision, as the central bank grapples with the latest inflation rate of 7% for the March quarter.

Australian shares fell further, with the S&P/ASX 200 last trading 1[ads1].14% lower.

The inflation rate in the Philippines eased for a fourth straight month to 6.1% in May, down from 6.8% recorded in April and slightly lower than the 6.2% expected by economists polled by Reuters.

Core inflation, which excludes some selected food and energy items, fell to 7.7% in May from 7.9% in April.

The country’s statistics authority explained that the decrease was due to transport prices of -0.5% compared to last year, against the increase of 2.6% in April

The prices of food and non-alcoholic beverages also recorded lower inflation of 7.4% in May, compared to 7.9% the previous month.

Restaurants and accommodation services also had a lower inflation rate of 8.3%, down from 8.6% the previous month.

— Lim Hui Jie

Shares in Taiwan Semiconductor Manufacturing Co climbed slightly after the American technology giant Apple announced that the new Mac Pro will use silicon from Apple. This means that the entire Apple computer range will now use the company’s own processors.

Although Apple does not disclose its suppliers, the new Apple M2 Ultra chip in the new Mac Pro is reportedly manufactured using TSMC’s process, which has also reportedly been used to produce Apple’s M1 and M2 series of chips.

The Apple announcement sent shares of Intel down, as it would mean that no Apple computers released after 2020 will use Intel chips.

Apple first released its homegrown M1 chip in November 2020 on the MacBook, after only using Intel chips in its computers since 2006.

The Reserve Bank of Australia is expected to keep its benchmark interest rate at 3.85%, according to a Reuters poll of 32 economists.

21 of the 32 respondents expect the RBA to hold interest rates, while 11 predicted an increase of 25 basis points to 4.1%.

The RBA raised interest rates last month after pausing in April, surprising investors and economists who had expected the central bank to hold.

The country’s inflation rate for April came in at a faster pace of 6.8%, compared with 6.3% last month and market forecasts of 6.4%.

— Lim Hui Jie

Japanese household spending fell 4.4% in April from a year earlier, a bigger drop than the 2.3% expected by economists polled by Reuters.

This is the sharpest drop since July 2021 and the fifth time in six months that household consumption has fallen since November 2022.

On a seasonally adjusted month-on-month basis, household consumption fell by 1.3% compared to March, against an expected gain of 0.6%.

— Lim Hui Jie

The Japanese yen has weakened towards levels that last prompted government officials to step in to prop up the currency. The currency strengthened slightly to below 140 against the US dollar on Tuesday.

HSBC’s head of Asian currency research Joey Chew predicts that government officials may intervene when the yen reaches the 145 level against the dollar.

She noted that before the September intervention, the month-on-month change in the currency was in the range of 6% to 8%.

Recent movements in the currency show a range of 4% to 5%, she said, adding that USD/JPY would need to rise to 145 to get above 6% month-on-month.

Meanwhile, Goldman Sachs economists noted in a May 26 research report that further rate hikes by the US Federal Reserve will weaken the yen further.

“We believe that if markets continue to price in a better US growth outlook and more hawkish Fed expectations, then this is consistent with JPY underperformance and interest rate differentials explain most of the recent JPY weakness,” they said.

– Jihye Lee

Tech giant Nvidia has been the darling of Wall Street this year due to a relentless rally in its shares fueled by growing demand for artificial intelligence.

However, Ark Invest’s flagship Ark Innovation ETF left Nvidia at the very beginning of January before the chipmaker enjoyed a strong rally that took it to a $1 trillion market cap.

Frank Downing, a research director at Ark Invest, spoke to CNBC about the investment house’s decision to exit its Nvidia position from its flagship fund.

CNBC Pro subscribers can read more here.

– Ganesh Rao

There are opportunities for investors – but also potential minefields – when the debt ceiling is lifted, such as an influx of treasury, according to some analysts.

In a June 4 report, Citi said it expects a net increase of about $400 billion in U.S. Treasury bill issuance in the near term — most of it in short-term bills.

Here’s how analysts recommend trading the debt ceiling aftermath.

— Weizhen Tan

Despite a handful of bullish market signs, some flashing warning signs give investors reason to be cautious, according to Bank of America.

“Many indicators have been flashing bullish backdrop signals that support the case for a much higher stock market well into 2024,” Stephen Suttmeier wrote in a Monday note to clients. “Bearish sentiment, light positioning and record cash suggest investors continue to fight the band.”

The technical research strategist noted that the 2023 S&P 500 trend mimics some “wall of worry bullish” swings in previous years, including 2020 and 2012.

“Risk management support moves up to 4200-4166, which must hold to have confidence in last week’s upside breakout,” he wrote.

– Samantha Subin

Shares of Intel fell more than 3% in afternoon trading after an announcement by Apple that an upcoming Mac Pro computer will include a new proprietary chip.

Intel chips were previously used in the Mac Pro. The announcement means that all Apple computers will use Apple chips going forward. Apple introduced its first chip in 2020.

The Securities and Exchange Commission filed 13 charges against the crypto exchange Binance and co-founder Changpeng Zhao. In the charges, the SEC alleged that billions of dollars worth of user funds were sent to a European company under Zhao’s control.

“Through thirteen indictments, we allege that Zhao and Binance entities engaged in an extensive web of deception, conflicts of interest, lack of disclosure and calculated evasion of the law,” SEC Chairman Gary Gensler said.

— Rohan Goswami, Alex Harring

US regulators are reportedly planning to lift capital requirements for big banks in the wake of a string of bank collapses earlier this year, the Wall Street Journal reported, citing people familiar with the matter.

Regulators are likely to propose a plan as early as this month that would lift total capital requirements by about 20% on average, according to the report. Potentially larger claims could come to banks that rely on investment banking or wealth management fees.

– Samantha Subin