US stocks surge after wild night; RBA tipped to make first interest rate rise in 11 years to curb inflation

Wall Street has ended higher after wild swings between profit and loss, and all eyes are on a possible interest rate rise by the Reserve Bank later today.

It was a volatile night of trade on the New York Stock Exchange, a day before the US Federal Reserve meets to consider its next move on interest rates.

US stocks fell 1 per cent at one stage, after a steep sell-off on Friday, as investors worried about higher interest rates and slower economic growth.

The Nasdaq turned positive in afternoon trade as investors bought up beaten-down technology firms.

The benchmark S&P 500 rebounded after dropping to the lowest since May 2021, and the Nasdaq fell to the lowest since November 2020 during the session.

By the close, the Dow Jones Industrial Average rose 0.3 per cent to 33,062, the S&P 500 gained nearly 0.6 per cent to 4,155, and the Nasdaq increased 1.6 per cent to 12,536.

Returns or yields on benchmark 10 year US Treasury bonds hit 3 per cent for the first time in more than three years.

The 10-year yield is an important barometer for mortgage rates and other financial instruments.

It has surged over the last two months as the bond market prepared for the US central bank to reduce its balance sheet, which ballooned to nearly $US9 trillion as the Federal Reserve bought bonds during the pandemic to stimulate the economy.

The Fed meets this week and is expected to raise interest rates by 50 basis points, to 0.75 per cent to 1 per cent, to tackle the strongest price rises in 40 years.

All eyes on RBA

The Reserve Bank is tipped to raise interest rates later today for the first time in 11 years to curb surging inflation, which is running at an annual rate of 5.1 per cent.

The central bank last raised the official cash rate by 0.25 basis points (0.25 per cent) in November 2010, which took the OCR to 4.75 per cent.

Official rates were slashed to a record low of 0.1 per cent in 2020 as an emergency response to the coronavirus pandemic.

Westpac’s Imre Speizer said in a research note that the bank predicted the RBA to raise interest rates today by 0.15 per cent to 0.25 per cent, which is also the market’s forecast.

The Australian dollar fell 0.2 per cent to 70.49 US cents, with the greenback approaching a 20-year high against a basket of currencies before the expected rate increase this week by the Fed.

At 7:00am AEST, the ASX SPI 200 index was down 0.4 per cent to 7,297.

Yesterday, the ASX 200 index fell 1.2 per cent to 7,347.

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Tech billionaire becomes largest AGL investor

Tech billionaire, Mike Cannon-Brookes, has bought 11.3 per cent of AGL Energy, becoming its largest shareholder through his private investment firm, Grok Ventures.

In a letter sent to AGL’s board of directors last night, he said he would vote against a proposed demerger, labeling it a “flawed plan.”

“Grok Ventures has acquired more than an 11 per cent interest in AGL, becoming the largest shareholder,” Mr Cannon-Brookes tweeted.

It comes two months after the company rejected his takeover bid.

AGL is Australia’s largest electricity generator and largest greenhouse carbon emitter.

Yesterday, AGL told shareholders it remains committed to the demerger, which would split the business into a separate energy retailer and power generator.

In a statement to the ABC, an AGL spokesperson said the company had not been contacted by Grok Ventures.

“The AGL Energy demerger is on track to be completed by the end of next month,” the spokesperson said.

EU ban on Russian oil looms

Oil prices rose overnight on continuing concerns over supply shortages as the European Union considers a ban on Russian crude oil because of the invasion of Ukraine.

Diesel prices rallied 5 per cent to $US4.0172 a gallon as a low supply of global inventories put pressure on oil prices.

Brent crude gained 0.6 per cent to $US107.62 a barrel at 7:00am AEST.

Earlier in the session, Brent and West Texas Crude fell on the news that the European Commission may spare Hungary and Slovakia from a Russian oil embargo as it prepares to finalize its next round of sanctions on Russia.

The EU is looking at banning Russian oil imports by the end of 2022, a major source of revenue for Russia.

Hungary and Slovakia are heavily dependent on Russian fossil fuels.

Spot gold slipped 1.8 per cent to $US1862.37 an ounce.

ABC/Reuters

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