Australian shares have rallied in early trade, after Wall Street clawed its way out of correction territory and rebounded from the worst of its coronavirus (COVID-19) panic.
It follows a volatile session overnight, as the Australian futures market fluctuated between positive and negative.
Investors are betting that the Reserve Bank will slash interest rates to fresh record lows this afternoon.
1. What’s the chance of a rate cut today?
Markets are pricing a 100 per cent chance of a 25-basis-point rate cut at 2:30pm (AEDT), and even the possibility of a bigger rate cut.
As coronavirus’ spread continues unabated, economists and markets are now expecting central banks to unleash a new round of monetary stimulus and slash interest rates.
The RBA would be the first in line to slash rates in response to the COVID-19 epidemic.
Over the next few weeks, central banks in New Zealand, Canada, the United States, United Kingdom, European Union and are expected to also cut rates to bolster their economies.
“It is a health crisis with very significant economic implications,” Morrison told media on Thursday, stating stimulus “measures would only be effective if they were targeted, modest and scalable.”
Morrison did not reveal any details of what that stimulus would look like, but did emphasis that the tourism, education, and marine sectors, as well as supply chains and exports, were particularly at risk.
What is clear is the government can’t simply rely on the RBA to do all the heavy lifting anymore.
2. Will the Virus impact the health of the property market?
The property market needs buyers, and buyers need cash or cashflow. Most buyers will borrow their money from the bank – which means they need to be credit-worthy.
> Jobs – could potentially be on the line with the coronavirus, as the health of employers and industry would be in trouble without cash flow and trade. This could be of concern depending on how deeply the roots of the virus reach and how long this plays out.
> Consumer sentiment – is also a huge factor in property prices. Sentiment has turned with supermarket shelves being emptied with what could be described as doomsday prepping happening around Australia at the moment.
> Buyers – With more foot traffic to stock up on essentials, this looks like less foot traffic in the property market.
There are also reports of Auctions being cancelled as ChineseÂ buyers can’t travel inspect homes.
Less buyers + less demand = lower prices in a simple supply and demand curve.
Please reach out if you would like to speak with us to review your loan and see what a rate cut would look like.