RBA’s dovish stance and Facebook’s meta bombs top this week’s big market events

US sharemarkets had their biggest four-day rally since November 2020 this week, before running out of steam following disappointing earnings reports from Facebook parent Meta Platforms and Spotify.

The Australian sharemarket, the ASX200, enjoyed a rebound supported by gains on Wall Street and relief as the RBA reiterated its dovish forward guidance despite stronger employment and inflation data.

Here are the top five things that happened in markets this week.

1. RBA remains dovish

As widely forecast, on Tuesday the RBA elected to keep interest rates on hold at 0.1 per cent and ended its $350 billion quantitative easing (QE) bond-buying program.

Despite the hawkish shift by the Federal Reserve and contrary to the expectations of the Australian interest rate markets, the RBA maintained its dovish forward guidance, saying “the board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve”.

2. New Zealand unemployment rate drops to lowest level in recorded history

NZ labour force data showed the unemployment rate dropped to 3.2 per cent, a rate never seen before in the survey’s history.

Expectations are rising that the RBNZ will lift interest rates at every meeting in 2022, taking the cash rate to 2.50 per cent by November.

3. US Q4 2021 earnings results – Meta Bombs

Facebook parent Meta Platforms plunged more than 20 per cent after its earnings report showed user additions stalled and provided weak guidance for the current period, raising concerns about its future growth.

Adjusted earnings came in at $3.67 per share versus $3.84 per share expected.

Q1 revenue is expected to be lower, between $27 billion and $29 billion, versus $30.25 billion expected.

4. Euro area inflation surges

Inflation in the euro area edged to a fresh record high of 5.1 per cent in January from 5 per cent in December, contrary to expectations of a fall to 4.4 per cent.

5. OPEC+ rubber stamps modest increase in production in March

At its monthly meeting, OPEC+ agreed to increase collective oil production by 400,000 barrels per day in March as expected.

Although the increase is modest, the group is consistently missing output targets.

If the group continues to do so, it will likely prompt another co-ordinated stockpile release from oil-importing nations.

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All trading carries risk. The figures stated are as of February  2, 2022. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.
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