Macro

The Reserve Bank of Australia has raised the cash rate to a 15-year high of 4.6 per cent and may keep it there until 2027 to balance demand and constrained supply, according to a new report. The report does not rule out further increases. Inflation remains close to 4 per cent, above the RBA's 2–3 per cent target band. The continuing Middle East war is straining supply chains and adding to cost-of-living pressures, cooling expectations for a rate cut in the middle of next year.

RBI has introduced measures to curb rupee volatility, which could ease immediate depreciation pressures in the currency market. These measures include limiting foreign exchange derivative contracts and increasing hedging costs for importers. Experts predict that these actions may lead to a reduction in USD/INR rates and forward premiums. However, external factors like crude oil prices may still pose challenges.

U.S. stocks finished Friday higher, recovering from a technology selloff sparked by questions over OpenAI’s revenue figures. The Dow Jones Indus...

U.S. stocks ended mixed, with the S&P 500 down 0.5% for a second straight decline, the Dow up 0.1% and the Nasdaq sliding 1.3%. Brent crude rose 4.1% to $104.28 a barrel as uncertainty around Iran continued to disrupt supply expectations. President Donald Trump said “productive discussions” were taking place with Iran, briefly pushing oil lower during the session.

U.S. stock futures fell across the board, with Dow futures down 0.8%, S&P 500 futures off 0.5% and Nasdaq futures lower by 0.7%. Sentiment came under pressure as Treasury yields continued to climb, oil prices rose and AI-related shares pulled back. Samsung Electronics posted operating profit below market expectations, weighing on Asian tech stocks. Europe’s Stoxx 600 slid to its lowest level since June as Brent briefly topped $105 a barrel and WTI climbed above $92.

The Reserve Bank of India raised its repo rate by 25 basis points to 5.5% and shifted its policy stance to “calibrated tightening,” aligning with a broader global tightening cycle. The central bank expects headline CPI inflation to average 5.8% over the next three quarters, while core CPI is projected at 4.4% for financial year 2027. Despite global economic uncertainty, it lifted its financial year 2027 GDP growth forecast to 7.1% from 6.7% and adjusted its quarterly projections.

Revisions to U.S. employment data have heightened concerns that the labor market is weakening, prompting investors to sharply scale back expectations for a Federal Reserve rate hike this month. The implied probability of an increase has fallen to 22% from 64% a week earlier. The dollar slipped as global equities gained, with Japan’s Nikkei up 2% in early trade and Australian shares rising 0.5%. MSCI’s Asia-Pacific ex-Japan index edged higher, while spot gold added 0.3%.

The Reserve Bank of Australia raised its official cash rate to 4.6% last week, the highest level in 15 years, with financial markets pricing in at least one additional hike. Against that backdrop, the preliminary auction clearance rate over the weekend fell sharply to 48.2%, the second-lowest reading so far this year. Home values across the five major capital cities are down 6.6% from their early-April peak, leaving the market 2 percentage points short of the sharpest price correction in more than 40 years.

A weaker-than-expected U.S. jobs report pushed the unemployment rate up to 4.2% and led markets to sharply increase bets that the Federal Reserve will pause rate hikes. Traders are now pricing an 83% probability the Fed holds rates in October. U.S. equity futures rose about 1%, led by Nasdaq futures up 1.4%, while Treasury yields fell across the curve with the 2-year yield down 7.1 basis points. Oil prices also eased, with Brent trading around $99.50 a barrel.

Commonwealth Bank CEO Matt Comyn said a November rate increase remains on the table, with the Reserve Bank’s next move hinging on quarterly inflation data due at the end of the month. He said CBA believes the central bank has finished raising rates for now, but described the RBA board’s final meeting of the calendar year as “live”. Comyn also noted national house prices fell 8.2 per cent when rates last peaked in 2023, and urged a stronger focus on productivity to lift economic growth.