Inflation watch by RBA lifts big banks, pushing ASX 0.7% higher at noon

Market Reports

by Melissa Darmawan

A buoyant session for mining and energy companies offsets a weak performance by technology and healthcare firms as the local bourse advances to its best performance since January this year. The gains extended from last week’s holiday shortened week after snapping its three week winning streak two weeks prior with investors optimistic after reading the RBA minutes.

As expected, rising inflation levels and wages growth are on watch over the coming months with the minutes confirming the economic outlook seen by the board with the effects of rising food and fuel costs set to cause downside risk across households.

"Inflation had picked up and a further increase was expected, with measures of underlying inflation in the March quarter expected to be above 3 per cent"

"Wages growth had also picked up but, in aggregate terms, had been below rates likely to be consistent with inflation being sustainably at the target” the board said.

Investors have been grappling with the path ahead around central banks’ interest rate hiking cycle sparking a bond sell-off as growth stocks take it on the chin as uncertainty prevails. Though clarity from the meeting minutes flag that the central bank could bring forward the interest rate timeline.

“These developments have brought forward the likely timing of the first increase in interest rates.”

Banks, wealth platform providers rally

Bank stocks are on the move amid this gaining up to 1.3 per cent with ANZ (ASX:ANZ) leading the pack by 1.3 per cent, followed by Macquarie (ASX:MQG) and National Australia Bank (ASX:NAB).

Investment platform provider Praemium’s (ASX:PPS) 82 per cent jump in its March quarterly net inflows of $725 million has got investors excited as the share price gallops 17.7 per cent to 73 cents. The platform provider has been on a roll since posting its record funds under administration of $49 billion in February with its Aussie arm taking home gold, contributing 63 per cent of flows of $446 million with the remaining $279 million derived internationally when compared to the prior corresponding period. Financial year to date net inflows also catapulted 112 per cent from $1.7 billion in March 2021 to $3.6 billion with total funds under administration of $47.7 billion, rising 26 per cent from $37.9 billion last year. The move comes after the platform provider inked a $65 million deal with Morningstar to sell its operations in United Kingdom, Jersey, Hong Kong and Dubai in December last year after Anthony Wamsteker was appointed chief executive officer in August 2021.

Meanwhile shares in Hub24 (ASX:HUB) jumped 1.6 per cent to $25.85 on net inflows coming in higher by 36 per cent to $2.6 billion, representing strong growth "in the context of declining equity markets, broader national Covid-19 outbreak and the seasonal holiday period".

While AMP (ASX:AMP) confirmed that they are in talks with Dexus and multiple parties over Collimate Capital and a potential sale of its assets and businesses. Shares are trading 0.2 per cent higher to $1.06.

Elsewhere from the stocks to watch, shares of Syrah Resources (ASX:SYR) jumped as high as 21 per cent before trading 13.1 per cent higher to $1.77 after the graphite miner said that it has conditional backing for a US$107 million loan from the US government to expand its Vidalia processing facility for the electric vehicle battery component in Louisiana.

SPI futures

At noon, the S&P/ASX 200 is 0.7 per cent or 54.50 points higher at 7,578.

The SPI futures are pointing to a rise of 47 points.

Broker moves

Credit Suisse rates Netwealth (ASX:NWL) as an outperform and drops the price target to $16.75 from $17.00. The third quarter inflows of $2.6 billion missed the broker’s $3.0 billion estimates attributed by labour shortages during the period. Credit Suisse cites that flows remain strong at around 20 per cent per annum.The company has reiterated full year flow guidance of more than $13.5 billion, implying fourth quarter inflows of at least $3.2 billion. Shares are trading 0.5 per cent higher at $13.26.

UBS rates QBE (ASX:QBE) as a buy and raised its target price to $15 from $14.40. The insurance group remains the broker’s favourite after citing that the company continues to enjoy a number of macro, micro and industry tailwinds. The broker says that it’s driving return on equity back to 14 per cent levels and believes the market appears to be underestimating the financial boost provided by ongoing repricing and rebounding bond yields. Shares are trading 1.9 per cent higher at $12.12.

Ord Minnett rates Transurban (ASX:TCL) as a buy with a reduced price target at $15.00 from $15.40. The broker cites that its March quarter traffic update showed improving trends as the economy reopens with the data points indicating an acceleration into the June quarter. Ord observes a gradual increase in average workday and airport-exposed traffic when compared to its peak since March 2020. The broker feels that the recovery could have been stronger without the disruption from the adverse weather in New South Wales and Queensland. Ords has adjusted its earnings forecast for financial year 2022 to take this into account. Shares are trading almost 1 per cent higher at $13.80.

Canaccord Genuity has downgraded IGO (ASX:IGO) to hold from buy, shares are up 0.5 per cent to $14.04 while the broker raised Nickel Mines (ASX:NIC) to buy from hold. Shares are trading 0.4 per cent higher to $1.26.

Goldman rated ReadyTech (ASX:RDY) as a new buy with a price target of $5. Shares are up 0.3 per cent to $3.18. Technology One (ASX:TNE) is also rated as a new buy with a price target of $13.90, shares are trading 1.1 per cent higher to $11.03 while Wisetech (ASX:WTC) is rated as a new neutral with a price target of $53. Shares are down 1.7 per cent to $46.19 along with the tech index.

Best and worst performers

The best-performing sector is materials, up 1.4 per cent. The worst-performing sector is information technology, down 0.9 per cent.

The best-performing stock in the S&P/ASX 200 is Imugene (ASX:IMU), trading 4.7 per cent higher at $0.23. It is followed by shares in Ramelius Resources (ASX:RMS) and Perseus Mining (ASX:PRU).

The worst-performing stock in the S&P/ASX 200 is Paladin Energy (ASX:PDN), trading 4.7 per cent lower at $0.92. It is followed by shares in and Lynas Rare Earths (ASX:LYC) and City Chic Collective (ASX:CCX).

Commodities and the dollar

Gold is trading at US$1977.76 an ounce.
Iron ore is 0.7 per cent higher at US$153.85 a ton.
Iron ore futures are pointing to a rise of 2.07 per cent.
One Australian dollar is buying 73.57 US cents.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.