RBA hikes cash rate by 50bp, Energy and tech gains: ASX closes 0.3% higher

Market Reports

by Melissa Darmawan

Australian shares held on to their gains after the Reserve Bank of Australia (RBA) reaffirmed its pledge to keep tightening monetary policy, joining other global central banks in combating multi-year inflation.

At the closing bell, the S&P/ASX 200 advanced for a second day, up 0.3 per cent or 18 points higher at 6,629.

RBA lifts cash rate by 50bp

The central bank raised the official cash rate by 0.5 per cent to 1.35 per cent, its first consecutive 50 basis point hike and the third straight meeting where an interest rate rise was unveiled.

The RBA said that the size and timing of future interest rate hikes will be guided by incoming data and the board's assessment of the outlook for inflation and the labour market. The central bank also reaffirmed its pledge to return inflation to its target of 2 to 3 per cent next year, forecasting inflation to peak around 6 per cent by the end of the year.

The annual headline inflation rate surged to 5.1 per cent in the first quarter of this year, according to the Australian Bureau of Statistics. This is what the everyday Australian feels and sees. However, the RBA’s preferred inflation gauge is the trimmed mean consumer price index, which rose by 3.7 per cent year-on-year, the fastest pace in 12 years in the first quarter.

The next inflation data is due July 27 for the June quarter ahead of the next RBA meeting on August 2. If inflation continues to climb above the RBA's forecast of 6 per cent as stated in the Statement on Monetary Policy - June 2022, the central bank could surprise investors with a supersize interest rate hike.

Meanwhile, the RBA has raised borrowing costs by 125 basis points since May, weighing on Australians, who are among the most indebted in the world.

According to the Bank for International Settlements, Australia is second in the world for highest household debt when measured against gross domestic product. Total credit to Australian households amounts to 119 per cent of annual GDP in the fourth quarter of 2021. Switzerland came in first with a ratio of 130 per cent to annual GDP.

Governor Philip Lowe has warned that the benchmark rate may lift to 2.5 per cent. Money markets' pricing implies a peak this year of about 3.2 per cent, raising concerns around the economy falling into a recession.

Energy stocks rally amid Libya protest, Norway strike set to hit oil output

Elsewhere, oil prices rose as supply disruptions continued to mount amid OPEC+’s inability to meet its production target. Protests in Libya have led to a fall in exports and a strike in Norway is expected to heighten this week.

Energy stocks came in as the best performer, up 2.2 per cent, followed by information technology, up 1.7 per cent, then healthcare, closing 1.2 per cent higher. Property was the worst performer, down 1.4 per cent, industrials fell 0.6 per cent and financials and consumer staples edged lower by 0.1 per cent. The other sectors advanced.

Woodside Energy (ASX:WDS) rose 3.8 per cent to $32.44, Beach Energy (ASX:BPT) rose 0.6 per cent to $1.75 and Santos (ASX:STO) closed 0.4 per cent higher at $7.48.

The iron ore miners rose despite the iron ore price being down 5.6 per cent at US$109.90 a ton. BHP (ASX:BHP) added 0.3 per cent to close at $40, Fortescue Metals (ASX:FMG) rose 1.5 per cent to $17.32 and Rio Tinto (ASX:RIO) eked out a gain of 0.04 per cent to $100.78.

The best-performing stock in the S&P/ASX 200 was Life360 (ASX:360), closing 11.3 per cent higher at $3.24. It was followed by shares in Regis Resources (ASX:RRL) and Brainchip (ASX:BRN). The worst-performing stock in the S&P/ASX 200 was Mirvac Group (ASX:MGR), closing 2.9 per cent lower at $2.01. It was followed by shares in Brickworks (ASX:BKW) and Stockland (ASX:SGP).

Local economic news

Retail sales in Australia rose by 0.9 per cent month-over-month to another record level of $34.23 billion in May, unrevised from the flash figure and after a final 0.9 per cent gain in April, according to the Australian Bureau of Statistics.

The seasonally adjusted S&P Global Australia Services PMI® Business Activity Index posted at 52.6 in June, down from 53.2 in May.

Consumer confidence fell 1.2 per cent in the previous week, according to ANZ and Roy Morgan.

Company news

Battery materials technology company Altech Chemicals (ASX:ATC) has inked a framework deal with German institute Fraunhofer IKTS. IKTS is seen as one of the leading research centres for battery materials in the world. Shares closed 13.5 per cent at 5.9 cents.

Invictus Energy (ASX:IVZ) has received an updated independent report for their prospective resource at the Mukuyu prospect in the Cabora Bassa project in Zimbabwe. The resource has been upgraded to 20 trillion cubic feet and 845 million barrels of conventional gas condensate. The upgrade marks a 2.7 fold increase on a barrel of oil equivalent basis to the 2019 independent assessment. Shares closed 17.2 per cent higher at 20.5 cents.

Regis Resources (ASX:RRL) has reported a 20 per cent jump over the quarter in total gold production to 123.9 thousand ounces. This comprises a 24 per cent growth in the company’s Duketon gold production to 92.8 thousand ounces and a 10 per cent lift in Tropicana gold production to 31.1 thousand ounces. Shares closed 10.7 per cent higher at $1.60.

Video technology company Atomos (ASX:AMS) has posted another record sales result with unaudited revenue in excess of $82 million for financial year 2022. Shares closed 51.1 per cent at 34 cents.

Bubs Australia (ASX:BUB) has been put into a trading halt to allow for an equity raising to take place, consisting of a $32.4 million institutional placement and a $30.6 million entitlement offer.

Chimeric Therapeutics (ASX:CHM) has appointed Cassandra Harrison to the position of vice president clinical operations and data management. Shares closed 2.1 per cent higher at 10 cents.

Judo Bank (ASX:JDO) reported that its loan book grew 6.1 per cent as of June to $6.09 billion from the month before. The neobank’s book has now grown 73 per cent since this time last year. Shares closed 0.8 per cent lower at $1.26.

The Dow Jones futures are pointing to a rise of 113 points.
The S&P 500 futures are pointing to a rise of 16 points.
The Nasdaq futures are pointing to a rise of 68 points.
The SPI futures are pointing to a fall of 1 point when the market next opens.

Asian markets

Japan's Nikkei has gained 1 per cent.
Hong Kong's Hang Seng has gained 0.2 per cent.
China's Shanghai Composite has lost 0.6 per cent.

Commodities and the dollar

Gold is trading at US$1810.79 an ounce.
Iron ore is 5.6 per cent lower at US$109.90 a ton.
Iron ore futures are pointing to a rise of 2 per cent.
Light crude is trading $0.55 lower at US$98.25 a barrel.
One Australian dollar is buying 68.57 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.