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Big week for the hip pocket

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by Peter Switzer

It’s a big week locally with the Reserve Bank (RBA) decision today and the important jobs numbers out in the US as well as here. All are bound to have an impact on our share prices and the interest rates we pay and receive.

Right now, stocks are defying gravity with oil price tensions thanks to Iran and question marks over the Greek debt deal worrying some investors, though the market is showing remarkable resilience.

The Dow lost 14.76 points, or 0.11 per cent, to finish at 12,962.81 while the S&P 500 wound up at 1364.33, which was down 5.3 points or 0.39 per cent.

A new curve ball was thrown at investors with China marking down its projected economic growth target from eight per cent to 7.5 per cent for 2012. This will not help BHP Billiton and Rio Tinto and really should make the RBA rethink its confidence around mining investment and, therefore, interest rates.

Today, the RBA is bound to say no to another rate cut but the new, lower growth target for China on top of terrible figures yesterday for company profits, the state of the services sector which has now contracted four out of the past five months and the lower SME business confidence levels certainly builds a case for another rate cut.

In contrast, the US services sector was up better than expected with a result of 57.3 when economists tipped 56.1 for February.

Any number above 50 equals expansion and so the Yanks are doing well while our result was 46.7 and it partly explains why our stock market is lagging Wall Street.

This week, the job figures in the US will have a big bearing on what happens to stocks while Thursday’s jobs report here could affect the course of local interest rates, which would affect the currency and then, eventually our stock prices.

But for this to happen we would need to see some substantial attitude changes from our RBA, which, at the moment, is hard to see.

Only a scary Greek debt development later this week could change its very stubborn mind.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Tuesday, March 06, 2012

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