Live markets, Wednesday October 6, 2021

Antipodean stock markets fell on Tuesday when a signal of an unexpected tightening from the Australian banking regulator was followed by a brutal and hawkish decision on New Zealand rates.

The benchmark S & P / ASX 200 started Wednesday’s session higher, but ended 0.6% lower at 7,206.5 points.

The market fell at noon after the Reserve Bank of New Zealand (RBNZ) said it would raise its target policy rate by 25 basis points to 0.5%, the first hike in seven years.

The rate hikes in New Zealand scared the market. Credit:Istock

He also looked beyond the economic damage from the foreclosure to warn of global pressures on the costs and prices of “unsustainable” domestic housing.

“While this was widely expected, and while (RBNA) had previously indicated that a number of rate hikes were likely over its forecast horizon, we nonetheless find its post-meeting statement relatively hawkish,” he said. said Nomura economist Andrew Ticehurst.

New Zealand interest rates could reach 2% by 2023, while Australia’s central bank said on Tuesday it was unlikely to start raising the target policy rate by 0.1% until 2024. This could lead to a significant differential between the key rates of Australia and New Zealand. in the coming years, although Mr Ticehurst has said the RBA will likely hike rates before 2024.

“The reason this gap is widening is that the New Zealand central bank has a lower inflation target of 2 percent, while Australia’s target is between 2 and 3 percent. This means that our central bank must encourage our economy to run a little warmer by keeping interest rates a little lower. ”

Meanwhile, the banking regulator’s decision to require lenders to consider a borrower’s ability to repay loans when interest rates hit 3 percent instead of 2.5 percent took breath away. at the Commonwealth Bank. The bank’s stock price fell 2% to $ 103.42, while ANZ Bank, NAB and Westpac also fell.

Magellan Financial Group fell sharply in the morning after a fund update, but rallied to close 4.1% lower at $ 32.52. Financial services firm HUB24 fell 3.7%, but QBE Insurance gained 2.8%.

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