• ASX 200 gains for third day in a row
  • RBA meeting minutes released, revealing the thought process behind the 25bp hike in May
  • US Fedspeak ahead

Sentiment turns bullish

Local blue chips made gains for the third consecutive day, with the benchmark ASX 200 finishing 0.28% higher today.

Sentiment has generally become bullish since Shanghai’s local government announced yesterday that the city would go back to normal on 1st June, and that shops will reopen in stages before then.

Energy stocks were the best performers today as oil prices jumped 3% overnight on China’s reopening news. Mining also rallied by 1%, but most other sectors finished lower.

Minutes of the RBA May meeting released today revealed that the Board had considered hiking by 40bp, before settling for 25bp.

Here’s an excerpt from the RBA minutes:

“Members considered three options for the size of the rate increase at the present meeting – raising the cash rate by 15 basis points, 25 basis points or 40 basis points,” the minutes said.

“Members agreed that raising the cash rate by 15 basis points was not the preferred option given that policy was very stimulatory and that it was highly probable that further rate rises would be required.

A 15 basis point increase would also be inconsistent with the historical practice of changing the cash rate in increments of at least 25 basis points.

“An argument for an increase of 40 basis points could be made given the upside risks to inflation and the current very low level of interest rates. However, members agreed that the preferred option was 25 basis points.”

Experts said there will be more rate increases this year, with some even predicting a 40bp rate hike in the next RBA meeting slated for 7 June.

Meanwhile, investors will be nervously watching another Fedspeak scheduled today (US time), with Fed Chairman Jerome Powell giving a talk at a Wall Street Journal conference.

 

BIG CAP WINNERS

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Miners like Ioneer (ASX:INR), Lynas Rare Earths (ASX:LYC) and Mineral Resources (ASX:MIN) were some of the best large cap stocks today, as confidence returned in the world’s second biggest economy, China.

Core Lithium (CXO) was up 7% after providing the market an update on its Finniss Lithium Project near Darwin.

Earthworks for the DMS (Dense Media Separation ) plant are nearing completion, with that area of the site to be handed over to Primero Group at the end of the week. The DMS plant will process the crushed ore to make spodumene concentrate, which will be ready for export.

Commonwealth Bank (ASX:CBA) lifted 2% after announcing the launch of Unloan, a digital app that allows mortgage borrowers pay an interest rate of 2.14% (2.06% comparison rate) and investors 2.44% (2.36% comparison rate), when their fixed rates roll off.

BIG CAP LOSERS

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Logistics company Brambles (ASX:BXB) was down 7%, after saying that private equity CVC Partners has pulled out of the proposal to acquire BXB, citing current market volatility.

Building group James Hardie (ASX:JHX) fell 3% after raising its product prices in North America for the second time in six months. The company said renovation backlogs are running at twice the normal level, and rate increases have had no impact on demand.