Relief rally fizzles for a 5th day: ASX closes 0.2% lower

Market Reports

by Melissa Darmawan

Australian shares gave back its gains after the relief-rally was overshadowed by concerns of future aggressive interest rate hikes from the Federal Reserve to curtail hot inflation. The ASX 200 remains in correction territory, falling 13.6 per cent from a record high of 7628.9 points in August last year.

At the closing bell, the S&P/ASX 200 was 0.2 per cent or 10 points lower at 6,591.

Investors initially piled back into equities on Fed Chair Jerome Powell’s comment that super-sized hikes will be unlikely after the central bank announced its biggest rise in borrowing costs since 1994. Mr Powell has also flagged that another large rate hike in July could be expected but also added that “today’s 75 basis-point increase is an unusually large one and I do not expect moves of this size to be common.”

US and Australian treasury yields fell as investors trimmed bets of a three-quarter point move. This helped technology stocks rebound where their valuations are based on future earnings using a discount cash flow method. However that sentiment changed which saw US treasury yields reverse course during the local session and pushed the local technology sector into the red.

Investors also had more to digest which saw the ASX 200 fizzled from its 1 per cent jump in the morning.

The nation’s jobless rate remained steady at 3.9 per cent last month with a better-than-expected 60,600 jobs added to the economy. Economists expected 25,000 jobs and for the jobless rate to come in at 3.8 per cent. The participation rate rose to 66.7 per cent from 66.4 per cent, according to the Australian Bureau of Statistics. The labour force figures are a key data point for the Reserve Bank of Australia to determine their next move on interest rates.

Seven sectors closed lower led by utilities by 1.6 per cent then industrials by 1.2 per cent and consumer staples by 1 per cent. Property led the gains by 1.5 per cent with energy, communication services and materials closing higher by up to 0.5 per cent each.

The winner of the session on the ASX 200 was Eagers Automotive (ASX:APE), closing 5.4 per cent higher at $9.30 after the auto retailer announced its major share buyback plan.

The loser was Link Administration Holdings (ASX:LNK), closing 10.4 per cent lower at $3.35 after the ACCC raised “significant preliminary competition concerns” about Dye & Durham’s $2.9 billion takeover bid for the company.

Base metals had a buoyant session amid positive industrial output data from China. China's industrial production unexpectedly grew by 0.7 per cent over the year in May, beating market consensus of a 0.7 per cent fall, rebounding from a 2.9 per cent drop in April, according to the National Bureau of Statistics of China. Manufacturing output bounced back following the easing of Covid-19 restrictions in some major cities while mining production continued to rise. IGO (ASX:IGO) rose 2.6 per cent to $10.99, Nickel Industries (ASX:NIC) added 2.9 per cent to $1.08, Chalice Mining (ASX:CHN) jumped 4.4 per cent to $4.03 and MinRex Resources (ASX:MRR) soared 18.2 per cent to 3.9 cents.

Meanwhile, mining stocks rebounded to end a four day losing streak. Rio Tinto (ASX:RIO) rose 0.7 per cent to $111.70 and BHP Group (ASX:BHP) closed 0.3 per cent higher at $44.01.

Investors will now turn their attention to the Bank of England’s policy decision as they await a fifth-straight interest rate hike.

Company news

Bubs Australia (ASX:BUB) has inked a deal with Walmart to supply six Bubs infant formula products and two Aussie Bubs toddler formula products. These are set to be available in 800 Walmart stores in America. Shares closed 7.1 per cent higher at 60 cents.

The Reject Shop (ASX:TRS) has appointed Phillip Bishop as its new chief executive officer. Mr Bishop will start in July. Shares closed almost 19 per cent higher at $3.39.

BHP (ASX:BHP) will keep its New South Wales Energy Coal project in its portfolio, scrapping its plans to sell the project, and will continue to operate it until 2030. Shares closed 0.3 per cent higher at $44.01.

Dreadnought Resources (ASX:DRE) has started drilling its rare earth ironstones within its Mangaroon project in Western Australia. The timeframe for completion of drilling is expected to be three months. The samples have been analysed using a handheld portable x-ray device which has indicated significant thicknesses of mineralised ironstone. They have been sent for a rush analysis. Investors have also been informed that regular updates from now till October are on the horizon. Shares closed 10.8 per cent higher at 4 cents.

Resolute Mining (ASX:RSG) has announced that its recent gold intersections are slated to contribute to an upgrade of its existing estimated one million ounces in sulphide. The gold miner believes that the results represent some of the best gold intersections recorded from the Syama North project. The drilling results have indicated the potential for a new open pit operation close to this project. Shares closed 10.4 per cent higher at 26 cents.

Hawsons Iron’s (ASX:HIO) board has endorsed the bankable feasibility study for the company’s high-grade iron project focused solely on the development of 20 million tonne per annum project due to its expected superior economic, ESG outcomes and investment appeal relative to a 10 million tonne per annum project. Also, a memorandum of understanding has also been signed with Flinders Ports. Managing director Bryan Granzien says that the news is “closer toward(s) achieving our goal of meeting demand for high-grade products so essential for decarbonising steel making”. Shares closed 15.6 per cent higher at 44 cents.

TerraCom (ASX:TER) has inked an offtake deal with its long-term Japanese trading partner for the delivery of up to 1.25 million tonnes of coal, starting from August this year. The agreement which goes for 13 months is set to be priced linked to the globalCOAL Newcastle index with an agreement of one cargo per month to be delivered. Shares closed 1.4 per cent higher at 74 cents.
 
Futures

The Dow Jones futures are pointing to a fall of 56 points.
The S&P 500 futures are pointing to a fall of 11 points.
The Nasdaq futures are pointing to a fall of 38 points.
The SPI futures are pointing to a fall of 18 points when the market next opens.

Asian markets

Japan's Nikkei has gained 0.5 per cent.
Hong Kong's Hang Seng has lost 1.3 per cent.
China's Shanghai Composite has lost 0.6 per cent.

Commodities and the dollar

Gold is trading at US$1832.39 an ounce.
Iron ore is 2.5 per cent lower at US$130.85 a ton.
Iron ore futures are pointing to a fall of 2.8 per cent.
Light crude is trading $0.76 higher at US$105.07 a barrel.
One Australian dollar is buying 70.06 US cents.

Sources: Bloomberg, IRESS, FactSet

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