Mining and energy companies propped up the Australian share market on Tuesday, though worries about a global economic slowdown and aggressive interest rate hikes kept sentiment in check.
The ASX 200 index closed 0.3 per cent higher at 7,112 points.
By 4:20pm AEST, the Australian dollar was trading at 70 US cents, after a 0.5 per cent rise.
The local currency fell as low as 68.73 US cents this week, its weakest level in two years.
Overnight, global market sentiment was affected by China's worse-than-expected economic figures, which showed that widening COVID-19 lockdowns took a heavy toll on consumption, industrial production and employment in April, adding to fears of a global slowdown.
"Chinese economic activity may recover in May because daily new infections have trended down recently and the number of medium‑ to high‑risk areas have fallen," said Commonwealth Bank's head of international economics Joseph Capurso.
Brambles takeover talks end, James Hardie profit jumps
Shares in Brambles dropped 7.6 per cent, after revealing that it is no longer a buyout target.
In a statement, it said European private equity firm CVC Capital Partners has pulled out of preliminary talks with Brambles, over a potential $20 billion takeover bid, citing "current external market volatility".
It comes a day after Brambles announced to the market that it was engaging in these discussions with CVC.
Meanwhile, James Hardie Industries' share price tumbled 3.5 per cent.
It was after the company reported its annual profit jumped over a third buoyed by strong demand for its fibre cement products in the North American market, but still came in at the lower end of its forecast range.
Its adjusted net income was $US620.7 million for the year ended March 31, compared with its forecast range of $US620 million to $US630 million, which was hiked four times during fiscal 2022.
Demand for new homes in the United States, which accounts for James Hardie's majority of revenue, grew last year as people flocked towards spacious, low-density accommodations helped by low lending rates and favourable market conditions.
However, with the US central bank raising interest rates to tackle growing inflation, the borrowing cost is also set to rise, resulting in a possible slowdown in the housing market.
Some of today's best performers include Lynas Rare Earths (+6.6pc), lithium producers Allkem (+5.5pc) and Pilbara Minerals (+5pc), along with Whitehaven Coal (+5.9pc) and Beach Energy (+6.1pc).
On the flip side, Pointsbet (-4.6pc), Magellan Financial (-4.1pc), Codan (-3.9pc), Goodman Group (-4.1pc) and REA Group (-4.1pc) experienced heavy losses.
RBA to hike rates again in June
The Reserve Bank has confirmed that it was considering a sharper rise in interest rates at its May meeting.
But it settled on a "normal" 25 basis point rise (0.25 percentage points) because it would meet again in a month, a strong hint it will hike again in June.
Minutes of this month's meeting showed the RBA board also considered hiking by 40 basis points.
However, it decided to move by 25 basis points to 0.35 per cent, since this would mark a return to "normal operating procedures".
"Given that the Board meets monthly, it would have the opportunity to review the setting of interest rates again within a relatively short period of time, based on additional information," the minutes showed.
"They also agreed that further increases in interest rates would likely be required to ensure that inflation in Australia returns to the target over time."
The market took that as a clear sign it would hike again at its June 7 meeting, and probably by 25 basis points.
Futures markets are now betting the cash rate target will lift to 0.60 per cent in June, and already have rates reaching 2.75 per cent by year end.
If correct, that would be one of the most aggressive tightening cycles in recent history and a serious burden to households who hold a record $2 trillion in mortgage debt.
The RBA's sudden shift on policy followed data showing inflation surged to 20-year peaks in the first quarter as energy, building, health and food costs all ballooned.
Core inflation shot to 3.7 per cent, the highest since 2009 and uncomfortably far above the RBA's 2 to 3 per cent target band.
Indeed, the central bank now expects core inflation to stay above the band until 2024, underlining the scale of the policy task ahead.
"Members observed that it would be more difficult to return inflation to the target if the inflation psychology in Australia were to shift in an enduring way," the minutes showed.
In deciding whether the June rate increase will be a normal (25 basis point) or larger move (40 basis points), the RBA will be closely watching this week's March-quarter wage figures (published on Wednesday) and April employment numbers (on Thursday).
Commonwealth Bank economist Belinda Allen said the RBA will probably opt for the larger rate hike if wages growth is "stronger than expected" (a quarterly jump of 0.9 per cent or above), or if the jobless rate is below 3.8 per cent.
Profit-taking after a rebound
"When you see big 'up' days, I'm not surprised to see some profit-taking on the subsequent day," said Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, who was referring to last Friday's rebound on Wall Street.
"We're simply seeing a reaction to recent strength. There are various factors driving the market, but in general, none of them are very positive."
The S&P 500 lost 0.4 per cent, to end at 4,009 points on Monday (local time). Overall, the benchmark index has posted a six-week losing streak, its longest since 2011.
The Nasdaq Composite dropped 1.2 per cent, to 11,664. The tech-driven index is in a bear market, having dropped by about 30 per cent since its November record high.
The Dow Jones index rose by 0.1 per cent, to finish at 32,236. But it has slumped for seven weeks in a row, its longest losing streak since 2001.
Shares in US mega-cap growth stocks fell, weighing heavily on the S&P and Nasdaq. They include Amazon and Google-owner Alphabet, which dropped 2 and 1.4 per cent respectively.
Twitter shares plunged by a further 8 per cent, after Elon Musk said a deal to buy the social media company at a lower price than his previously agreed $US44 billion was "not out of the question", according to a Bloomberg report.
Tesla, which Musk leads, fell by 5.9 per cent.
Markets pricing in 'too much' recession risk
Investors have been worried that aggressive interest rate hikes by the US Federal Reserve to combat decades-high inflation could tip the economy into a recession.
The war in Ukraine, supply chain disruptions and the pandemic-related lockdowns in China were also exacerbating the economic troubles.
Traders are now pricing a near 86 per cent chance of a 50-basis-point hike (0.5 percentage points) by the Fed in June.
A key concern is that, by allowing US inflation climb to its highest level in around 40 years, the Fed may need to hike interest rates more aggressively, to the extent it may trigger an economic downturn.
But markets may be pricing in "too much recession risk", according to one of JP Morgan's lead strategists Marko Kolanovic, who has maintained a "pro-risk" mindset.
In a note to clients, he wrote that US and European stock markets are betting on a 70 per cent chance of a "near-term recession".
He said this was higher than the estimates from investment-grade debt markets (50 per cent), high-yield debt markets (30 per cent) and rate markets (10 to 20 per cent).
"Equities stand to recover if a recession doesn’t come through, given already substantial multiple de-rating, reduced positioning and downbeat sentiment," he added.
Gold lifted by 0.7 per cent, to $US1,824 an ounce.
Oil prices rose as the European Union stepped closer to an import ban on Russian crude and traders viewed signs that the COVID-19 pandemic was receding in the hardest-hit areas of China, suggesting a significant demand recovery was in the works.
Brent crude futures jumped 2.4 per cent, to $US114 a barrel.