ASX lifts after RBA leaves rates on hold

HMC Capital climbed 6.5 per cent after telling a Macquarie conference its profits were ahead of its own forecasts from February, with full-year operating earnings per share now tracking to be up 21 per cent at 40¢ apiece.

The laggards

While all sectors were in the green, consumer staples (up 1 per cent) was the weakest sector with Endeavour Group closing flat.

Spark NZ (down 1.2 per cent), critical minerals miner IGO (down 1 per cent) and TPG Telecom (down 0.9 per cent) were the worst-performing mega-caps, with lithium miner Pilbara Minerals (down 0.5 per cent) and medical equipment supplier EBOS Group (down 0.3 per cent) rounding out the list of the biggest large-cap decliners.

The lowdown

IG Australia market analyst Tony Sycamore said that due to the market’s heightened sensitivity to incoming economic data, investors would seek further insights into the economy’s trajectory and inflation from upcoming data, including in the federal budget and the Reserve Bank minutes.

“While we view the bar to another RBA rate hike as high, we acknowledge the window for rate cuts in 2024 has narrowed, and last month pushed back our call for a first RBA rate cut from August until November,” he said.

Sycamore said that before the central bank’s announcement, there was a roughly 40 per cent chance of a rate hike of 25 basis points priced into the interest rate market for August. There was now a 25 per cent chance of such a rise, he said.

Overnight on Wall Street, the S&P 500 rose 1 per cent, the Dow Jones added 0.5 per cent and the Nasdaq composite jumped 192.92, or 1.2 per cent, to 16,349.25.

Tech stocks were at the forefront in US trading, with familiar ringleaders Nvidia and Super Micro Computer again pulling the market higher.

The US stock market has been swinging sharply since setting a record at the end of March. It sunk for weeks on fears that stubbornly high inflation would prevent, or at least delay, the Federal Reserve from delivering the cuts to interest rates that Wall Street craves.

But markets found a burst of optimism at the end of last week following a cooler-than-expected jobs report. It suggested the US economy could nail the tightrope walk of staying strong enough to avoid a bad recession, but not so firm that it puts too much upward pressure on inflation.

Goldman Sachs economist David Mericle said he still expected two cuts to rates in the US this year, in July and November, after Fed chair Jerome Powell “pushed back strongly against the possibility of further rate hikes” at his press conference last week.

This week won’t include such highly anticipated events for the world’s largest economy as last week’s Fed meeting or monthly jobs report.

The bulk of companies in the S&P 500 have also already reported their results for the first three months of the year, with more than three-quarters of them topping profit expectations, according to FactSet.

But several more big names are still on the way this week, including The Walt Disney Co. and Uber Technologies.

In the bond market, which has been dictating much of the action in the stock market recently, Treasury yields held mostly steady.

The yield on the 10-year Treasury edged down to 4.49 per cent, from 4.50 per cent late on Friday. The two-year Treasury yield, which more closely tracks expectations for the Fed, was also relatively little changed.

Traders are betting on a nearly 89 per cent chance that the Fed will cut its main interest rate at least once before the end of the year, according to data from CME Group.

In other international markets, several exchanges were closed for holidays. Indexes rose relatively modestly in France and Hong Kong. They jumped 1 per cent in Germany and 1.2 per cent in Shanghai.

Corporate results have been better than expected, not just in the United States but also in Europe and Japan, according to strategists at Deutsche Bank.

Global earnings are on track for a second straight quarter of growth following four consecutive declines.

Tweet of the day

Quote of the day

“There are very real stresses in the economy,” ANZ boss Shayne Elliott said as the bank posted a 7 per cent fall in half-yearly cash profit and announced a $2 billion buyback to boost its shares.

You may have missed

Lawyers for Bonza’s administrators told the Federal Court the airline’s fleet will likely be removed from Australia as internal emails between its backers, its lessor and its financier confirm they knew of the plans to seize the planes weeks before passengers were left stranded.

AP

The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.