RBA rate hangover lingers as investors fret Fed hike outcome, ASX fades 0.2% lower

Market Reports

by Melissa Darmawan

Investors await the next batch of interest rate outcomes around the globe with the US Federal Reserve set to unveil its next hike with economists expecting 50 basis points on the table.

The RBA's rate hike continues to reverberate with the 10 year yield rising to its highest point since 2014 as the aggressive bond sell-off continues. However on the shorter end of the curve, the sell-off was more pronounced with the 2 year, jumping 25 basis points towards a 10-year high.

Some parts of the Aussie yield curve are not far away from inverting, playing into concerns about a consumption-led economic pullback given the heightened sensitivity of indebted households to mortgage rates.

While economists raised rate hike projections following the RBA outcome, there is some scepticism that the cash rate will reach 2.50 per cent flagged by Governor Philip Lowe. Consumer sentiment has already been shaken with confidence slipping to pandemic lows with respondents negative about the outlook for the economy and their finances.

All this was reflected in the market today as the local bourse lacked conviction, closing at session lows.

At the closing bell, the S&P/ASX 200 was 0.2 per cent or 12 points lower at 7,305 continuing its losing streak for the third day.

Energy shares added 0.8 per cent as the top performing sector followed by financials, up 0.7 per cent with industrials, healthcare, and utilities closing fractionally higher. Real estate was the worst performing sector, tumbling 1.5 per cent to the lowest level in nearly two months with the rest closing lower.

Miners didn’t help with investor sentiment, though bear in mind the iron ore market was closed which meant that the miners were lacking any meaningful catalyst. BHP Group (ASX:BHP) down 0.6 per cent to $47.40, Rio Tinto (ASX:RIO) fell 0.7 per cent to $111.11 while Fortescue Metals Group (ASX:FMG) closed 2.4 per cent lower at $20.12.

AVZ Minerals (ASX:AVZ) dived 19.2 per cent to a two-month low to 80 cents after its subsidiary received a mining licence for its Manono lithium and tin project in the Congo.

ANZ’s (ASX:ANZ) cash profit fell by 3 per cent to $3.1 billion for the first six months ending 31 March with its 72 cent fully franked interim dividend meeting expectations. The banking giant does not expect its mortgage book to grow at the rate of the market till the end of the current half as interest rates start to rise. Inflation also had a role to play which led to ANZ dropping its $8 billion cost target. Shares closed 0.4 per cent higher to $29.64.

Other major banks rallied with National Australia Bank (ASX:NAB) added 1 per cent to $32.44, Macquarie Group (ASX:MQG) added 0.6 per cent to $204.73, Commonwealth Bank (ASX:CBA) rose 0.7 per cent to $102.98, and Westpac closed 0.7 per cent higher to $24.07.

Flight Centre (ASX:FLT) experienced turbulence, failing to take-off closing 6.7 per cent lower to $21.19. The travel booker flagged that it faced a loss of as much as $225 million in underlying earnings before interest, tax, depreciation, and amortisation for the current financial year despite Aussies booking flights to get out and travel.

JB Hi-Fi (ASX:JBH) fell 4.7 per cent to $49.73 after the electronics retailer withheld providing full year sales and earnings guidance. Despite a strong quarter, the company said that due to the strained supply chain they could not be certain around inventory amid the global macro uncertainties.

ARB (ASX:ARB) dived 11.2 per cent to $33.61 after unveiling that despite expected increased revenue this year, the company is set to face strong headwinds due to several cross currents of a global shortage of new cars, strained supply chain, and skills shortage.

Technology players fell with Block (ASX:SQ2) taking a dip of 3.6 per cent to $143.12 while Zip Co (ASX:Z1P) tumbled 10.8 per cent to $1.03 on a filing that showed that over 22.1 million shares are due to be released from voluntary escrow.

Futures

The Dow Jones futures are pointing to a rise of 9 points.
The S&P 500 futures are pointing to a rise of 4 points.
The Nasdaq futures are pointing to a rise of 21 points.
The SPI futures are pointing to a fall of 9 points when the market next opens.

Best and worst performers

The best-performing sector was Energy, up 0.8 per cent. The worst-performing sector was Real Estate Investment Trusts, down 1.5 per cent.

The best-performing stock in the S&P/ASX 200 was HUB24 (ASX:HUB), closing 3.9 per cent higher at $24.83. It was followed by shares in Orora (ASX:ORA) and Virgin Money UK (ASX:VUK).

The worst-performing stock in the S&P/ASX 200 was AVZ Minerals (ASX:AVZ), closing 19.2 per cent lower at $0.80. It was followed by shares in ARB Corporation (ASX:ARB) and Zip Co (ASX:ZIP).

Asian markets

Japan's Nikkei is closed due to Greenery Day.
Hong Kong's Hang Seng has lost 1.26 per cent.
China's Shanghai Composite is closed due to Labor Day.

Commodities and the dollar

Gold is trading at US$1863.80 an ounce.
Light crude is trading $1.55 higher at US$103.96 a barrel.
One Australian dollar is buying 71.19 US cents.

Source: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics


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