RBA’s first rate hike in a decade. Fed’s biggest hike is next. Biden offers $3b grants for EV metals RBA’s first rate hike in a decade. Fed’s biggest hike is next. Biden offers $3b grants for EV metals RBA’s first rate hike in a decade. Fed’s biggest hike is next. Biden offers $3b grants for EV metals

RBA’s first rate hike in a decade. Fed’s biggest hike is next. Biden offers $3b grants for EV metals

Equities 5 minutes to read
APAC Strategy Team

Summary:  Australia’s central bank rises rates for the first time in decade, hiking rates more than expected spooking growth investors, while FX investors rejoice after the Australian dollar (AUDUSD) rallies off its low. Australia’s banks are due to report results this week, expected to report lackluster results after lending has dropped. The world’s largest EV battery maker, CATL reported impressive 154% growth in revenue. The US announces $3.2 billion in grants for key battery metal producers in lithium, cobalt and nickel to shore up US battery supply. Here is what to consider.

Written by Jessica Amir  and Redmond Wong

What’s happening in markets that you need to know?

US major indices rallied on Tuesday despite US 10 bond yields hitting 3% for the first time since 2018; The Nasdaq 100 (USNAS100.I) rose 1.6% and S&P 500 (US500.I) gained 0.6% ahead of the Fed rising rates on Wednesday, with the market pricing in rate hike of 0.5% (its biggest hike since 2000). Expedia (EPE) reported better than expected results after the market closed and its shares rose 3.6% after hours. The online travel agency reported revenue rose 80% y/y to $2.25b with its Trivago business revenue far beating expectations, while air revenue missed. It also guided for a stronger recovery in the US summer.

“Compulsory measures” against a person named “Ma” sent tech stocks down briefly this morning.  Hang Seng Index (HSI.I) gained modestly after initial selling at the open.  Hang Seng TECH Index (HSTECH.I) was down about 1%.  Earlier in the morning, shares of Chinese internet companies, in particular Alibaba (09988) were sold following a news report saying an individual with the last name “Ma”, which is the same as Alibaba’s Jack Ma’, had been put under “compulsory measures” in Hangzhou, the city in which Alibaba is based.  Alibaba’s shares fell as much as 9% before it rebounded on clarification from the Hangzhou police that the individual’s name differed from that of Jack Ma.

The Australian share market (as measured by ASX200) fell into the red, after the RBA rose interest rates far more than expected today. The Reserve Bank of Australia (RBA) rose rates for the first time since November 2010, after receiving the hottest inflation read in 20 years, while  forecasting inflation will surge to a peak of 6% in 2022. The RBA rose rates by 0.25% to 0.35% (vs a 0.15% hike expected). Market expectations now suggest the RBA will rise rates another 8 times after today’s move, which could take rates to 2.8% by the year end. But we think rates will rise further than that, given what happened today, plus many companies are forecasting inflation and supply shocks will linger this year. Stocks that traditionally suffer from higher rates, like property were sold down today. While the down beaten Tech sector remained surprising elevated up 1.1% boosted by Wall Street sentiment. Appen (APX) the co-creator of Siri rose 6.6% (but Appen is still down 85% from its 2020 high). Block (SQ2) is up 5.6%, hitting a month high. EML Payments (EML) rose off its two-year low.

What to consider?

We could see a very short term rally in beaten down stocks;
With financial conditions tightening ahead of the Fed’s interest rate decision on Wednesday, The Fed could be more dovish. Since the Fed’s last meeting; the 10 year yield topped 3% for the first time since 2018 (today), the US dollar rallied 5%, The S&P500 has fallen 8.74%, and hedge fund exposures fell to a 1.5 year low. So the Fed may be a little more dovish than expected, and we could see a very short term rally in tech and cyclical stocks that have been hit the hardest. Keep in mind though, the longer term picture is still very bearish, medium and longer-term, as the Fed is taking out $1 trillion a year out of the system and the economy is expected to slow.

Longer-term  investors will need to revisit their investment strategy; in this new sink or swim phase of tight money. As mentioned yesterday an entire generation of investors will have to adjust their investment strategy, and look at stocks that are likely to thrive in a wave of tightening monetary conditions. So consider looking at commodity kingpins, companies with strong balance sheets (that can survive record inflation (oil and wages)) and those companies that have guided for stronger outlooks and are beating expectations.

China’s CATL (300750) net profits fell 24% YoY on a 12pp gross margin compression. The world’s largest EV battery maker, China’s CATL reported impressive 154% growth in revenues YoY but a worse than expected fall in net profits.  The battery maker was unable to pass on the sharp increases in materials to EV automakers.  The company’s gross margin in Q1 fell 12.9 percentage points YoY or 10.2 percentage points QoQ.  According to analyst estimates, the company’s domestic market share has shrunk to 47% in March 2022.

Investors of Chinese internet stocks are put on a red light green light game. The press release statement from China’s Politburo generated much excitement among investors and analysts about ending of crackdown on Chinese internet companies and stepping up of fiscal and monetary stimulus. Much of the hype, however, is prone to fade. For details, please refer to our latest China Updates.

Earnings results to watch next?

US earnings results to watch:

  • In the Travel/Tourism/Reopening theme Ceasers (CZR) (May 4th)
  • Car makers: VW (VOW) reports May 4th

Australian company earnings results to watch:

  • Logistics: Amcor (AMCR, AMC) reports on May 4
  • Banking: ANZ (ANZ) reports on May 4,  NAB (NAB) on May 5th Virgin Money (VUK) May 5th, Macquarie (MQG) on May 6, Westpac (WBC)
  • Bitcoin/Payment tech: Block (SQ) reports on May 6th

For a global look at markets – tune into our Podcast. 


The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/en-ch/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/en-ch/legal/saxo-select/saxoselect-disclaimer)

Saxo Bank (Schweiz) AG
Beethovenstrasse 33

Contact Saxo

Select region


All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.