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The ASX trimmed a second day of falls as the Reserve Bank renewed its pledge to keep its foot on the accelerator until at least 2024.
The central bank left its official lending rate at 0.1 per cent and reaffirmed its commitment to “highly supportive monetary conditions” until employment and inflation reach its targets.
The S&P/ASX 200 pared a 44-point decline to a final loss of 19 points or 0.27 per cent.
Woodside Petroleum and the big three iron ore producers advanced after crude hit a two-year high and ore prices rebounded almost 6 per cent. Woolworths, Goodman and Afterpay also rose. ANZ, Telstra and Macquarie Group were the biggest drags.
What moved the market
On a day when strong economic data underlined the strength of the economic rebound, the RBA stuck to the line that it does not expect to increase the cash rate until “2024 at the earliest”. The bank said actual inflation would need to be “sustainably within the 2 to 3 per cent target range”. However, the bank will consider amending its stimulatory bond-buying program at its next meeting.
The bank acknowledged strengthening house prices but threw the responsibility for maintaining an orderly market back on lenders.
“Given the environment of rising housing prices and low interest rates, the Bank will be monitoring trends in housing borrowing carefully and it is important that lending standards are maintained,” the bank said.
CoreLogic this morning announced its Home Value Index climbed 2.2 per cent last month, adding to gains of 1.8 per cent and a record 2.8 per cent over the previous two months. Major cities including Sydney, Brisbane, Adelaide and Canberra have seen double-digit growth over the last 12 months. Prices in Melbourne have risen 5 per cent and in Perth 8.45 per cent.
“You have to go back many a decade to observe as strong a 3 month period of dwelling price rises as we are seeing right now. The line between this being an economic positive and negative was likely crossed some time ago,” Alex Joiner, Chief Economist at IFM Investors, tweeted.
Other data this morning also underlined the economy’s remarkable turnaround from last year. The national current account surplus increased a seasonally-adjusted $2.32 billion last quarter to a record $18.3 billion, thanks to the resources boom. Building approvals eased from record levels but remained near historic highs.
Consumer confidence took a hit from Victoria’s Covid outbreak. The ANZ-Roy Morgan weekly survey showed confidence dropped 2.5 per cent last week after the lockdown was announced. Victoria this morning reported nine new local cases in the last 24 hours, six of which were announced late yesterday.
Overnight declines on European markets kept a lid on US futures ahead of the resumption of trade tonight following the Memorial Day long weekend. S&P 500 futures edged up two points or 0.04 per cent.
Winners’ circle
A sharp reversal in iron ore lifted the big three producers. The spot price for ore landed in China bounced $11.10 or 5.9 per cent yesterday to US$198.75 a tonne. Fortescue Metals advanced 1.74 per cent, Rio Tinto 0.7 per cent and BHP 0.13 per cent.
Woodside Petroleum rose 1.38 per cent as oil burst through US$70 a barrel. Brent crude was last up 97 cents or 1.4 per cent at US$70.29. Santos gained 2.07 per cent. Oil Search added 1.65 per cent.
Nine Entertainment climbed 0.67 per cent to a three-month peak on news of a content deal with Facebook and Google. The media group will provide news video and articles to Facebook for up to three years. A five-year deal with Google also includes news content. Nine expects revenue from the deals to help grow publishing earnings by $30 – $40 million next financial year.
News of a rebound in demand helped lift shares in automotive software-as-a-service provider Infomedia 12.92 per cent. The company said it expected full-year revenue of $95-$96 million, thanks to a pick-up in organic growth since December.
Doghouse
The big four high-street banks extended yesterday’s reversal. ANZ sank 1.39 per cent, NAB 0.82 per cent, Westpac 0.83 per cent and CBA 0.26 per cent.
Toll road operator Transurban fell 0.58 per cent after announcing a boardroom reshuffle. Patricia Cross, Craig Drummond and Marina Go will join the board.
Other heavyweight drags on the market included Telstra -1.14 per cent, Macquarie Group -1.02 per cent, CSL -0.76 per cent and Aristocrat Leisure -0.24 per cent. Coles shed 0.48 per cent. Rival Woolworths gained 0.34 per cent.
BetMakers’ fall from grace since launching an ambitious $4 billion bid for Tabcorp’s wagering and media business continued into a third session. Shares fell 5.15 per cent to their weakest in two months. The share price has collapsed from $1.60 last Thursday to a low of $1.02 this morning.
Other markets
A mixed session on Asian markets saw the Asia Dow rise 0.32 per cent and Hong Kong’s Hang Seng add 0.52 per cent. China’s Shanghai Composite dipped 0.11 per cent and Japan’s Nikkei shed 0.21 per cent.
Gold climbed $9.20 or 0.5 per cent to US$1,914.50 an ounce.
The dollar turned neutral following this afternoon’s RBA rates announcement. The Aussie eased 0.01 per cent to 77.42 US cents.
