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Aussie shares caught an up-lift from a general improvement in market mood as investors prepare for a jumbo US rate hike and embrace the possibility of smaller increases in Australia.
The S&P/ASX 200 bounced 86.5 points or 1.29 per cent from a two-month low. The rally followed a rebound on Wall Street ahead of tomorrow’s Federal Reserve policy meeting.
Resource stocks led as oil and gold prices improved. Utilities and banks also advanced. Healthcare and property stocks dragged.
What moved the market
The market clawed back more than a quarter of its losses across four sessions since stubbornly high US inflation data cemented expectations for another huge increase in US interest rates. The Federal Reserve is expected to lift the target federal funds rate by at least three-quarters of a percentage point when it announces on Thursday morning, Australian time.
The outlook for Australia is more benign, with the Reserve Bank looking increasingly likely to pare back the current aggressive pace of increases, perhaps as soon as next month. The minutes from this month’s monetary policy meeting showed the bank debated a standard 25 basis point increase before opting for a fourth straight increase of 50 bp.
“Given the importance of returning inflation to target, the potential damage to the economy from persistent high inflation and the still relatively low level of the cash rate, the Board decided to increase the cash rate by a further 50 basis points,” the minutes said.
Next month’s decision looks like a tight call after the bank acknowledged the argument for smaller increases as the cash rate target rises. The bank has lifted its benchmark rate five times in five months from a record-low 0.1 per cent to 2.35 per cent.
“All else equal, members saw the case for a slower pace of increase in interest rates as becoming stronger as the level of the cash rate rises,” the minutes said.
City Index market analyst Tony Sycamore believes the bank is close to a rates pause.
“Our base case… is for a 25bp rate hike in October, which would see the cash rate rise to 2.60%, into mildly restrictive territory before year-end,” he said. “The RBA is likely to pause then to allow time to assess the full impact of the rate hiking cycle on inflation, growth, and labour market data.”
Buyers were encouraged today by an overnight reversal in the US. The S&P 500 swung to an overnight gain of 0.69 per cent after opening 0.9 per cent in the red.
Winners’ circle
Coal miner New Hope jumped 8.79 per cent to an all-time high after increasing full-year after-tax net profit by a staggering 1,138 per cent to $983 million. Profits surged as the average realised price of thermal coal almost tripled to $281.84 per tonne. Prices continued to increase as the year advanced. The miner said its average realised price in the fourth quarter was $493.52.
Battery metal miners continued to outperform. Mineral Resources gained 5.26 per cent, Lynas Rare Earths 4.9 per cent, Nickel Industries 4.68 per cent and IGO 4.63 per cent.
The ASX index of gold miners climbed 1.4 per cent further from Friday’s four-year low. Ramelius gained 3.03 per cent, De Grey 2.49 per cent and Evolution Mining 2.44 per cent.
BHP +3.62 per cent, Rio Tinto +2.52 per cent, Commonwealth Bank +1.98 per cent and Woodside +1.94 per cent were the pick of heavyweights.
Tabcorp will pocket $62 million after selling its eBet business to former executive Frank Makryllos’s Venue Digital Technology. The sale is expected to deliver a pre-tax gain of $39 million. The share price rose 1.03 per cent.
Record full-year sales helped raise Rip Curl and Kathmandu brand owner KMD 2.23 per cent. The retailer reported a 6.2 per cent increase in group sales to an all-time high of NZ$979.8 million. Net profit declined 40 per cent to NZ$36.8 million, impacted by Covid store closures, increased rents and higher wages.
Student placement service IDP Education gained 2.32 per cent after announcing the acquisition of a UK-focussed placement agency. IDP will pay $83 million for Intake Education, which has operations in the UK, Africa and Asia.
Doghouse
Fortescue Metals eased 0.86 per cent after announcing a US$6.2 billion plan to eliminate its use of fossil fuels by 2030. The miner said the plan will reduce operating costs by US$818 million per year from the end of the decade.
Just four stocks on the index declined more than 2 per cent. The worst performers were biotech Clinuvel Pharmaceuticals -4.11 per cent, REIT Abacus Property-2.21 per cent, biotech Telix Pharmaceuticals -2.12 per cent AMP -2.07 per cent.
Other notable falls included Cochlear -1.85 per cent and Star Entertainment -1.38 per cent.
At the heavyweight end, Macquarie Group dipped 0.09 per cent and Goodman Group 0.17 per cent.
Other markets
An upbeat session in Asia saw the Asia Dow rally 0.81 per cent, China’s Shanghai Composite 0.22 per cent, Hong Kong’s Hang Seng 1.2 per cent and Japan’s Nikkei 0.46 per cent.
US futures built on last night’s rebound. S&P 500 futures were recently ahead 11.5 points or 0.29 per cent.
Oil rose for a second session. Brent crude climbed 12 US cents or 0.13 per cent to US$92.12 a barrel.
Gold reversed some of last night’s US$5.30 decline, rising US$1.90 or 0.1 per cent to US$1,680.10 an ounce.
The dollar eased 0.18 per cent to 67.2 US cents.
