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It started off optimistically but the ASX 200 is now dropping on Tuesday, as the stock market prepares for yet another rate hike.
The ASX 200 index was up 0.5 per cent, to 6,887 points, by 10:55am AEST.
However, by 1:30pm it was trading flat.
Lithium stocks were having a positive day after upgrades from analysts. Top performers included Lionstown and Pilbara Metals, which were both up more than 6 per cent.
On the flip side, Super Retail Group was down more than 5 per cent.
The Reserve Bank is set to hike the cash rate yet again at 2:30pm AEST. Pundits are tipping between a 0.25 and 0.5 per cent rise.
Wall Street was closed overnight for a public holiday.
The Australian dollar slipped to 67.97 US cents, around a seven-week low against the greenback.
Many economists are predicting the RBA will lift its cash rate target by 0.5 percentage points. This would bring the new cash rate to 2.35 per cent, its highest level since December 2014.
With inflation surging at its fastest pace in about 30 years, and wages struggling to keep up, the RBA has very little choice but to increase rates. It's also under pressure to slow the economy down without causing too much pain for businesses and households.
A person with a $500,000 variable mortgage, and 25 years left to pay it off, will see their monthly repayment rise by about $140, according to comparison website RateCity.
However, when one considers the impact of five rate hikes — including today's — that borrower would have to fork out an extra $600 per month.
European stocks fall after Russia shuts down gas pipeline
European stock indices fell overnight, while the euro dropped below 99 US cents for the first time in 20 years after Russia said its main gas supply pipeline to Europe would stay shut indefinitely.
Gas deliveries had been due to resume on Saturday, however, Russia scrapped that deadline on Friday and did not give a new timeframe for re-opening. The news stoked fears of a recession in Europe, with businesses and households hurt by sky-high energy prices.
European gas prices jumped as much as 30 per cent as the market opened.
Germany announced on Sunday about $65 billion of support to help protect Germans from rising costs.
Finland and Sweden also announced plans to offer liquidity guarantees to power companies.
And Finland's Economic Affairs Minister, Mika Lintilä, warned of the possibility of "kind of a Lehman Brothers" effect on the energy industry, referring to the 2008 collapse of what was then the fourth-largest US investment bank.
Nomura economist George Buckley said it was uncertain how much the support packages from European governments would mitigate the energy crisis.
"The impact of what's happening from energy is absolutely enormous," Mr Buckley said, "so I think the bigger risk is that it's just simply not possible: Like COVID, you can do a lot to help but you can't offset it."
Europe's STOXX 600 was down 0.8 per cent, having recovered slightly after approaching a seven-week low earlier in the session.
London's FTSE 100 was 0.1 per cent higher. However, Germany's DAX was down 2.3 per cent on the day.
The European Central Bank (ECB) meets later this week and is expected to deliver its second big rate hike in an attempt to combat inflation, which is running at more than four times its 2 per cent target.
"Sky-high energy prices, the risk of gas shortages and the fiscal and regulatory response will shape the outlook for euro zone GDP and inflation much more than anything the ECB may do with rates," Berenberg chief economist Holger Schmieding said in a client note.
In the UK, Liz Truss was named as Britain’s next prime minister, taking power at a time when the country faces a cost-of-living crisis, industrial unrest and a recession.
In her victory speech, Ms Truss said she planned to cut taxes and deal with energy bills.
Oil prices jump on supply cut
On oil markets, Brent crude jumped 2.4 per cent, to $US95.23 a barrel, extending gains as OPEC+ producers agreed to a small oil production cut to bolster prices.
The 100,000 barrels per day (bpd) reduction by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) amounts to only 0.1 per cent of global demand.
That group also agreed they could meet any time to adjust production before the next scheduled meeting on October 5.
"It's the symbolic message the group wants to send to the markets, more so than anything," said Oanda analyst Craig Erlam, adding that the 100,000 bpd raised last month by OPEC+ was not seen as a big deal.
"What we've probably seen from the markets was pricing in most of the worst-case scenario," he added.
Russian Deputy Prime Minister Alexander Novak said that expectations of weaker global economic growth were behind a decision by Moscow and its OPEC allies to cut oil output.
"The bigger picture is that OPEC+ is producing well below its output target and this looks unlikely to change, given that Angola and Nigeria, in particular, appear unable to return to pre-pandemic levels of production," Capital Economics' chief commodities economist, Caroline Bain, said.
ABC/Reuters