The Reserve Bank is tipped to bring forward rate rises after opting not to defend soaring bond yields which decimated shares.
Investors on Friday sold bonds and pushed the Australian three-year bond yield to 7.75 per cent, well above the RBA 0.1 per cent target, as they looked for better returns.
Investors are increasingly sure the RBA will hike rates earlier than its forecast of “not before 2024” as inflation mounts.
The central bank started its bond buying program last year to underscore its commitment to low rates during the pandemic.
JP Morgan Australia chief economist Ben Jarman said the bank’s decision not to buy bonds on Friday and keep yield down was significant.
He said he expected the program to be scrapped at the monetary policy decision on Tuesday.
Mr Jarman said the RBA’s inflation and wage growth requirements for higher rates appeared no longer binding.
He tipped the central bank to lift rates at the end of next year.
Monetary policy will also be in the spotlight in the US next week.
Royal Bank of Canada analysts have tipped the Federal Reserve to begin easing bond buying.
Inflation has been higher in the US than Australia and the former is tipped to have higher rates sooner.
The US and Chinese economies slowed in the past quarter, according to GDP data. Both were affected by supply shortages.
Domestically, Westpac will attract lots of attention on Monday after its reveals full-year earnings.
Westpac shares fell more than two per cent in the most recent session, as did the Commonwealth Bank and NAB. ANZ lost more than one per cent.
All share categories fell. Property stocks fared worst.
The benchmark S&P/ASX200 index closed lower by 106.7 points, or 1.44 per cent, to 7323.7.
The All Ordinaries closed down 100.6 points, or 1.3 per cent, to 7639.1.
Macquarie Group more than doubled first-half profit and is raising $1.5 billion to pursue new opportunities.
The group had net profit after tax of $2.04 billion after the same period last year was ravaged by the coronavirus.
The interim payout was $2.72 per share, higher than the previous interim dividend of $1.35 per share. Both were 40 per cent franked.
Shares last traded for $197.83 before being paused for a share sale.
Sleep specialist ResMed improved sales by 20 per cent in its first quarter to $US904 million.
Higher demand for sleep and respiratory products was helped by a competitor’s product recall.
Shares were up more than four per cent to $37.17.
In mining, BHP declined 1.19 per cent. Fortescue fell 0.64 per cent, while Rio Tinto slumped by 2.66 per cent.
Casino operator Crown has paid $125 million to settle a shareholder class action from 2017.
The company said it was likely to recover a significant portion of the expense through insurers.
Meanwhile, billionaire James Packer has told a West Australian royal commission there were “many oversights” during his time overseeing the Perth casino operations.
Shares were down about one and a half per cent to $9.96.
Car parts supplier GUD Holdings said it was increasing prices to deal with inflationary pressures.
Company leaders said the increase in domestic travel due to the pandemic would mean more people driving. People would also shun public transport, they said.
Shares were up more than six per cent to $12.20.
The Australian dollar was buying 75.40 US cents at 1727 AEDT, higher from 75.05 cents at Thursday’s close.
ON THE ASX
* The benchmark S&P/ASX200 index closed lower by 106.7 points, or 1.44 per cent, to 7323.7 on Friday.
* The All Ordinaries closed down 100.6 points, or 1.3 per cent, to 7639.1.
* At 1727 AEDT, the SPI200 futures index was up 13 points, or 0.18 per cent, at 7293 points.
CURRENCY SNAPSHOT
One Australian dollar buys:
* 75.40 US cents, from 75.05 cents on Thursday
* 85.59 Japanese yen, from 85.26 yen
* 64.61 Euro cents, from 64.74 cents
* 54.68 British pence, from 54.65 pence
* 104.95 NZ cents, from 104.70 cents.
