Banks, miners offset gains in tech, Why renewed fears around RBA rate outcome, ASX down 0.1% at noon

Governor Philip Lowe will be put to the test today as the RBA is set to meet in the most highly anticipated interest rate decision.

First rate hike since 2010?

The central bank is expected to raise rates for the first time since 2010 to suppress inflation with economists expecting a 15 basis point move to 0.25 per cent with others betting on a super-sized hike of 40 basis points.

The economy has all the ingredients for an interest rate hike with the the trimmed consumer prices, the figure that the central bank watches, rising to 3.7 per cent in March over the year which is sitting comfortably above the target 2 to 3 per cent, a tight labour market with the unemployment rate at 4 per cent, the lowest since 2008 with wage growth rising 0.7 per cent over the quarter to 2.3 per over the year.

Mr Lowe said that he would like wage growth to be at 3 per cent to consider hiking rates alongside a rising inflation rate. However, the central bank faces two key events ahead of them that has the nation in the spotlight among the Group of 10.

Why are investors nervous about this RBA meeting?

A looming federal election on May 20 and wage growth data on May 18 is leading to renewed nervousness by investors about this particular meeting. Why?

Prime Minister Scott Morrison has campaigned that interest rates and taxes will remain low under his administration amid the nation’s strong economic record. However, the last time the RBA raised interest rates during an election was in 2007 when governor Glenn Stevens and his board hiked the rate by 0.25 percentage points to 6.75 per cent. The move frustrated prime minister John Howard at the time who went on to lose his seat and the election.

Falls in banks and miners offset gains in tech

Given the uncertainty, the local bourse has been volatile despite opening lower. It’s a mixed performance across the sectors with materials and financials, offsetting the gains across information tech and healthcare sectors.

At noon, the S&P/ASX 200 is 0.1 per cent or 4.70 points lower at 7,342. The SPI futures are pointing to a fall of 19 points.

Magellan Financial Group (ASX:MFG) is the best performer of the session while Silver Lake Resources (ASX:SLR) is the worst amid a broker downgrade from Macquarie. Qantas (ASX:QAN) has extended its gains, taking off 2.3 per cent higher to $5.89 while biotech giant CSL (ASX:CSL) is providing support with a similar percentage rise of 2.3 per cent to $276.53.

Stock stand-outs

Meanwhile, Prime Minister Scott Morrison weighs in on billionaire Mike Cannon-Brooke’s 11 per cent acquisition of AGL (ASX:AGL) before the proposed demerger. Investors learned that Scott Morrision believes that it's an issue for the company to resolve and that he believes the role of his government is to ensure reliable and affordable energy in the market, according to The Australian. Shares are trading 2.8 per cent lower to $8.38.

Several companies are slipping after updating their guidance at the Macquarie Australia Conference. Cleanaway (ASX:CWY) has tumbled 4.8 per cent to $3 after warning that lagging cost recoveries and one–off operational disruptions is set to dent the company’s financial year 2022 EBITDA by around $15 million to $20 million.

Inghams (ASX:ING) is down 3.3 per cent to $2.90 after saying that its recovery has been impacted by ongoing effects of the Omicron outbreak, natural disasters and higher feed costs.

Bapcor’s (ASX:BAP) share price continues to fall, trading 4.3 per cent lower to $6.44 even as its financial year 2022 year to date performance through to 31 March has also been strong given the circumstances in the first half. Fundamental drivers of the automotive aftermarket remain strong and are expected to continue to do so with the company, continuing to aim to deliver pro forma earnings at least at the level of financial year 2021.

Lithium miners buck the trend

The Biden administration unveiled a US$3.2 billion (AU$4.2 billion) grant to support the local manufacturing of EV batteries in America. The grant is set to be put aside to produce key battery metals such as lithium, cobalt and nickel.

Domestically, lithium miners have taken the spotlight with recently announced offtake agreements. Liontown Resources (ASX:LTR) has inked a deal with Tesla while Lake Resources (ASX:LKE) has one Ford. Other companies to keep an eye out for are Pilbara Minerals (ASX:PLB), Allkem (ASX:AKE), AVZ Minerals (ASX:AVZ), Nickel Mines (ASX:NIC), and IGO (ASX:IGO).

All these companies are on the move today despite the local bourse trading 0.3 per cent lower with Nickel Mines (ASX:NIC) leading the pack, trading 2.3 per cent higher to $1.34.

Best and worst performers

The best-performing sector is information technology, up 1.7 per cent. The worst-performing sector is utilities, down 1.1 per cent.

The best-performing stock in the S&P/ASX 200 is Magellan Financial Group (ASX:MFG), trading 7.4 per cent higher at $17.50. It is followed by shares in ZIP Co. (ASX:ZIP) and Appen (ASX:APX).

The worst-performing stock in the S&P/ASX 200 is Silver Lake Resources (ASX:SLR), trading 4.8 per cent lower at $1.69. It is followed by shares in Cleanaway Waste Management (ASX:CWY) and Inghams Group (ASX:ING).

Commodities and the dollar

Gold is trading at US$1860.92 an ounce.
One Australian dollar is buying 70.90 US cents.
Iron ore futures are pointing to a rise of 4.2 per cent.
One Australian dollar is buying 70.90 US cents.