Market wrap: Federal election and hawkish RBA move expected to dominate markets this week

The Australian federal election is being held on Saturday.

The Australian federal election is being held on Saturday.

Another wild ride for US sharemarkets last week, down over 6 per cent at one point, before a rally on Friday helped trim losses to a more respectable 2.4 per cent.

The month of May has lived up to its reputation as a volatile one for the ASX200, which closed the week 1.8 per cent lower at 7075 after being down 3.75 per cent at one point.

Here are the top five things to watch in markets this week:

1. RBA meeting minutes

The RBA’s May meeting minutes are expected to be hawkish, reinforcing expectations for another rate hike at its next board meeting in early June.

2. AU labour force survey

The market is looking for 20,000 increase in employment.

The participation rate is expected to stay at 66.4 per cent, and the unemployment rate is expected to fall from 4 per cent to 3.9 per cent.

3. First-quarter 2022 US earnings season continues

US earnings season continues with some of the country’s largest retailers set to report, including Walmart, Home Depot, Target and Lowes.

Shoppers flocked to Target during the pandemic, resulting in an acceleration in sales and earnings growth.

Adjusted EPS is expected to fall 16.2 per cent from last year to $3.09 as it comes up against tough figures from the year before.

Overall revenue is forecast to rise 2.2 per cent year on year to $24.4 billion.

4. Can Bitcoin continue to bounce back?

Bitcoin fell by 25 per cent last week to nearly $25,000 after the third-largest stable coin, Terra, de-pegged from the US dollar.

Bitcoin has since rebounded above $30,000, leaving signs of capitulation at last week’s low.

Capitulation is often seen in markets ahead of rebounds.

5. Federal election

The Australian election is just five days away.

Both polling and betting markets have the ALP well ahead.

Although these aren’t necessarily foolproof, and unlike the 2019 election, the economic policies of the major parties are similar, which means the impact on markets should be limited in the event of an ALP win.

If neither party wins enough seats to form government in their own right, then both parties will seek the help of independents to form government.

In return for their support, independents may insist on policies that are less market friendly.

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All trading carries risk. 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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