A cautious start awaits the Australian stock market Monday morning, but attention will quickly pivot to this week US Federal Reserve meeting, where another supersized rate hike is expected.

Economic Calendar and News

There is one event that will dominate the conversation in financial markets this week, and that is the Federal Reserve two-day policy meeting. After last week US core inflation data suggested hopes of peak inflation could be premature, pressure is on the world largest central bank to make a decisive move to tackle what is a growing pain for households and the global economy.

Traders have upped their bets that the Federal Reserve could deliver a full percentage point rate hike, which prompted 10-Year Treasury Yields to inch closer towards the decade-plus high that was tested just three months ago. Nonetheless, the consensus view at this stage is that a 75 basis point hike will follow, so the market may be unsettled by anything that deviates from that projection.

What may be more important than the magnitude of the hike itself is the accompanying statement and press conference from the Fed, as any concerns about a hard landing for the economy could give rise to further angst among investors after the door was previously left ajar for a possible soft landing.

Apart from the Fed, the week ahead in the USA will also include fresh data on housing starts, building permits, home sales, the Current Account, as well as interim readings on services and manufacturing activity. Locally, the RBA will also have a role to play, with the minutes from its most recent Board meeting set to be published on Tuesday. That will come just days after Governor Philip Lowe defended the central bank record, making it clear officials would be undeterred from increasing rates as elevated inflation would be a worse outcome for the economy than a decline in real wages. 

Mr Lowe also took the opportunity to call for greater reform around taxes in order to simultaneously balance government spending programs and reining in the federal budget deficit.

This week, two of his RBA colleagues will also be front and centre providing speeches.

Stocks on watch

With another large rate hike in store for the US this week, investors will likely be keeping a close eye on tech stocks, which have already proven susceptible to volatility over recent weeks. Stocks like Adobe (NASDAQ: ADBE), Meta (NASDAQ: META), and Nvidia (NASDAQ: NVDA) are just a few of the names trading at two-year lows. 

Adobe was punished last week on news the software giant intends to spend around US$20 billion to acquire collaborative design application Figma. 

In the case of Meta, its shares plummeted 14% to its lowest point since the pandemic market crash of 2020, and a similar level when the company was contending with the Cambridge Analytica Scandal from 2019. It has warned sales will fall for the second consecutive quarter due to headwinds such as reduced business advertising, increasing social media competition, and Apple iOS privacy update.

Meanwhile, Nvidia is set to hold its widely awaited GPU Technology Conference (GTC), which is an opportunity for the company to unveil the latest developments across its microchip portfolio, and some of the emerging applications for technology in the semiconductor industry.

Sticking with the US, trading in the major banks may provide a better indication as to how the market receives this week rate hike. Stocks like Bank of America (NYSE: BAC), JPMorgan (NYSE: JPM), Citi (NYSE: C), Goldman Sachs (NYSE: GS), and Wells Fargo (NYSE: WFC) are all in a sector that tends to benefit as interest rates climb.

However, investors will be weighing how likely the rate hikes push the US economy towards a recession, and also what impact a weaker macro environment might have on corporate activity, a major boon for the big banks during the pandemic. 

Rate implications in the US could also have a flow-on effect for ASX real estate names and insurers, particularly if an aggressive rate hike fuels expectations the RBA will need to follow suit. As such, some of the property names that could be on watch include Goodman Group (ASX:GMG), GPT Group (ASX: GPT), and Charter Hall Group (ASX: CHC), while on the insurance side, Insurance Australia Group (ASX: IAG) could come into focus.After the close of trade on Friday, rumours began circulating that Australia biggest company BHP (ASX: BHP) could be weighing up another tilt at copper miner OZ Minerals (ASX: OZL). Having already had a bid at $25 per share instantly knocked back, reports suggest the miner could improve its $8.4 billion offer by the end of the month as it seeks exposure to assets deemed pivotal to the green energy transition.And lastly, it is unlikely there will be any media reprieve for Star Entertainment Group (ASX: SGR), with the casino operator currently in limbo as it makes its case with the NSW gambling regulator to retain its operating licence. 

While it was dealt a blow last week when an inquiry report lambasted some of its conduct - even being deemed unfit' to run its Sydney casino - the stock was one of the best performers as investors took confidence in the company pledge to reform itself. It would also appear that investors increasingly believe a fine or modifications to the company licence are more likely than said licence being suspended or rescinded.