Market Highlights: ASX looking to grow in first full post-RBA session

S&P/ASX 200 Futures ahead 0.25%, after Wall Street rose overnight
Economist says RBA’s decision to leaves cash rate on hold ‘no surprise’
Bank of Japan lifts its interest rate for the first time in 17 years

The S&P/ASX200 index futures contract was up 0.2% to 7715 points this morning, following another strong session on Wall Street overnight.

The benchmark closed 27.40 points, or 0.36% higher on Tuesday to 7,703.20 to cross above its 20-day moving average, after the Reserve Bank of Australia (RBA) kept rates on hold.

RBA Governor Michele Bullock and the Board kept the cash rate at 4.35%, but made it clear nothing would be ruled in or out over the months ahead.

The RBA’s most recent rate hike was in November 2023 with a 25bps lift to 4.35%, a 12-year peak. The hike marked the central bank’s 13th rate increase since May 2022, as the central bank worked to guide inflation back within its target range of 2-3%.

Yesterday’s rate hold was largely anticipated with January’s Australian CPI registering at 3.4% year-on-year, below economists’ projected consensus of 3.6% and the lowest annual inflation rate since November 2021.

In its statement detailing the reasons for maintaining the cash rate, the RBA observed that “inflation continues to ease but remains elevated”.

“While there are encouraging signs that inflation is moderating, the economic outlook remains uncertain,” the statement says.

“While recent data indicate that inflation is easing, it remains high.

“The Board expects that it will be some time yet before inflation is sustainably in the target range.”

RSM Australia economist Devika Shivadekar says there were no surprises in the RBA’s decision to hold the cash rate steady on Tuesday.

“The cautious hold shows the RBA treading very carefully around non-tradable inflation risks amid ‘excess demand in the economy’,” she says.

“We also see the RBA concerned with unit labour costs running high amid poor productivity despite some marginal improvements of late – a trend it worries may not be sustainable.”

Shivadekar says the RBA will feel the need to be alert for two reasons.

“The Federal Budget slated for May, will potentially be stimulatory as the Federal Government aims for ‘sustainable’ growth’, and revamped tax cuts from July will, in principle, increase disposable income significantly for lower income earners who are traditionally spenders over savers,” she says.

“Despite the tax cuts being factored into the RBA’s forecasts, they still warrant some vigilance.

She says pay rise for workers including age care will also bump up disposable income and could lead to more spending.

Bank of Japan lifts rate for first time in 17 years

The Bank of Japan (BOJ) has hiked rates for the first time since 2007, raising its key interest rate from -0.1% to a range of 0% to 0.1%. This decision follows an increase in wages following a rise in consumer prices.

In 2016, the bank reduced the rate below zero in an effort to stimulate the country’s stagnant economy. Following the increase by Japan’s central bank hike, there are no longer any countries maintaining negative interest rates.

Under negative rates, there are charges for depositing money in a bank with the approach adopted to incentivise spending rather than saving money in banks.

The BOJ has also abandoned its yield curve control (YCC) policy, which involved purchasing Japanese government bonds to regulate interest rates. Introduced in 2016, YCC has been criticised for distorting markets by preventing long-term interest rates from rising.

In a statement the BOJ says it will maintain its bond purchases at a similar level and increase acquisitions if yields spike. Expectations for a rate hike had been mounting since Kazuo Ueda assumed office as governor in April of last year.

Despite slowing inflation, Japan’s core consumer inflation remained at the central bank’s 2% target in January, according to the latest official data.

Not the ASX

On Wall Street overnight, the S&P 500 closed 0.65 higher, the tech-focused NASDAQ index gained 0.4% and the Dow Jones was up 0.8 stronger as investors look ahead to the US Federal Reserve’s policy meeting, with a statement expected at 5am (AEDT) on Thursday, set to include updated economic projections.

Fed Chairman Jerome Powell is expected reaffirm the central bank’s stance of awaiting further evidence of inflation moderation, suggesting a cautious approach towards near-term speculation of a rate cut.

According to the latest US CPI figures headline inflation had a monthly gain of 0.4% in February and 3.2% over the prior year, slightly up from a 0.3% rise in January and 3.1% annual gain and higher than forecast.

Overnight, Apple propelled four out of the magnificent seven higher, while Tesla, Alphabet, and Meta experienced declines.

AI chipmaker had a volatile session dropping by ~3% in morning trading, impacting other chip stocks, but later rebounded to close 1% higher.

Nvidia’s highly anticipated chip launch, led by CEO Jensen Huang at its ‘AI Woodstock’ event on Monday night (US time) provided insights into its upcoming AI chip generation.

The company’s immensely popular H100 has faced supply shortages since the surge in AI demand began in late 2022. The new Blackwell chips are being touted as much faster and larger than their predecessors.

Commodities

Oil prices are higher as traders continue to assess how Ukraine’s recent attacks on Russian refineries could impact global supplies.

Brent crude is up 0.32% at $US87.17/barrel and US WTI has lifted 0.50% to near $US83.13/barrel.

Iron ore has lifted after its downward trajectory and is currently 1.95% higher to US $104.50/tonne.

Gold is 0.05% lower to $US2158/ounce, while copper is down 1.61% to US$4.04lb.

US 10-year bond yields are hovering around 4.30% ahead of the Fed’s interest rate decision.

The Aussie dollar is down 0.42% trading at US65.31c after the RBA left rates on hold.

Bitcoin briefly traded below $US64,000 and has slumped more than 10% since resetting its record high north of US$73,000 last week.

Shares to watch on Wednesday:

Ragnar Metals (ASX:RAG) has released geophysical results from its Olserum North Heavy Rare Earth Project in Sweden, including multiple highly magnetic trends over “a well-defined corridor measuring 4.5km long and 500m-1km wide,”
where no previous sampling has been completed.

RAG says six new magnetic trends coincide with gravity anomalies, indicating high-density targets are highly prospective for HREE mineralisation. The company says reconnaissance field sampling program on targets will kick off shortly.

Enterprise loyalty and rewards company Gratifii (ASX:GTI) has inked two new agreements with Aussie payments company subsidiary EML Payment Solutions, a wholly-owned subsidiary of EML Payments (ASX:EML).

GTI says the deal will deliver prepaid debit cards to GTI’s Australian clients and extend the range of rewards available to EML’s clients.

Doctor Care Anywhere Group PLC (ASX:DOC) says it has launched a partnership with home health test provider Medichecks to become its preferred provider of GP consultations for customers seeking advice on their test results.

DOC says the diagnostics partnership extends its involvement “in the patient’s care journey and through the collaboration,” adding that customers of Medichecks’ broad range of at-home blood tests can now book an appointment with a Doctor Care Anywhere GP to follow up.