Last Orders: Small caps gain 2.1% as RBA trims cash rate

Small caps have had their best day in nearly a month as the Reserve Bank of Australia delivered a Melbourne Cup rate cut, and embarked on a $100 billion round of the government bond-buying program known as quantitative easing.

The Small Ordinaries index (ASX:XSO) of Australia’s 201st to 300th-biggest companies closed on Tuesday up 2.1 per cent to 2,778.2. The ASX200 (ASX:XJO) rose 115.1 points, or 1.9 per cent, to 6,066.4, in its best day since October 5.

The market rose at the open, dipped slightly ahead of the RBA’s 2.30pm announcement and then moved even higher once the RBA confirmed it would cut the cash rate by 15 basis points to a record low 0.1 per cent – as was widely expected.

The central bank also said it would reduce the target for yield on the three-year Australian government bond to around 0.1 per cent, and didn’t expect to increase the cash rate for at least three years.

RBA Governor Philip Lowe said the RBA is “committed to doing what it can to support the creation of jobs”, but other commentators warned it could have serious consequences.

BetaShares chief economist David Bassanese said that by joining “the aggressive global race to the bottom in terms of interest rates, and race to the top in terms of money printing,” the RBA risked unleashing “a major bubble in both house and equity prices”.

The RBA did not take this action because it expects a decent economic recovery – it did so because the outlook is so very concerning that it had to throw the kitchen sink at the problem.
Next step, the dishwasher, oven and microwave

— Stephen Koukoulas (@TheKouk) November 3, 2020

Elsewhere, we may know by this time tomorrow if Joe Biden has managed to unseat Donald Trump and become America’s 46th president. Polling site Fivethirtyeight was giving Trump a one-in-10 chance of hanging on, while prediction market PredictIt was giving Biden a 63 per cent chance of victory and Trump, 43 per cent.

On the ASX, White Cliff Minerals (ASX:WCN) was among the biggest small-cap gainers, rising 19.2 per cent to 3.1c after completing soil sampling across its Midas copper-gold project in WA’s Paterson Province. Over 500 samples were taken across five of seven priority areas in the project, the company said.

In other small cap company news:

Announcements

– Isentia Group (ASX:ISD) shares crashed 32.4 per cent to 12.5c after the media-monitoring provider said a cyberattack last week would cost it $7 million to $8.5 million in lost profit. The Guardian Australia has reported the attack was a ransomware strike that encrypted systems. Isentia said its Mediaportal platform is operational “following the implementation of several concentrated work programmes, but some key services remain affected”.

– Adriatic Metals (ASX:ADT) said it has settled a legal dispute brought by its major shareholder, Sandfire Resources (ASX:SFR). Sandfire has agreed to pay Adriatic $8.6 million in cash for the issue of 4.8 million in shares in the company pursuant to Sandfire’s anti-dilution rights. Adriatic shares closed up 1.3 per cent to $2.33 while Sandfire stocks dipped seven per cent to $4.13.

– Laybuy (ASX:LBY) gained 1.4 per cent to $1.45 after the Kiwi buy now, pay later company announced it was launching a digital BNPL Mastercard in Australia. The digital card will make it even easier for merchants to offer “tap to pay” BNPL to their shoppers, managing director Gary Rohloff says.

– Australian Potash (ASX:APC) gained 3.9 per cent to 13.5c after announcing it had raised $7 million to advance its Lake Wells Sulphate of Potash project in WA. Institutional and professional investors bought 63 million shares at 11.1 cents each, the company said.

– Predictive Discovery (ASX:PDI) gained 1.7 per cent to 6c after announcing it had bought out its joint venture partner Progress Minerals in its property package in Burkina Faso, West Africa. Predictive is acquiring Progress Minerals’ 51 per cent stake in the 722-square-km gold project for $240,000 worth of PDI shares. Predictive says it will look to find another party to develop the project while it concentrates on a gold project in Guinea.

– Micro-X (ASX:MX1) went into a trading halt, saying it had received correspondence from the US government “concerning a funding award from the US Department of Homeland Security”. The company didn’t disclose further details.