CLOSING BELL: RBA delivers Lowe voltage shock with ‘more now, and more to come’ interest rate call
The ASX has had a choppy old day, with the benchmark struggling to gain and maintain any sort of traction right up until the RBA delivered its monthly interest rate ankle-tap, right on cue at 2:30pm. More on that later.
A quick-fire look at the market sectors shows that Energy is likely the only sector that’s going to end the day any better than break-even, up a measly 0.3% as the market winds to a close. Worst performing sectors include Real Estate (-1.83%) and Health Care (-1.41%), with both Consumer sectors lagging – Staples down 1.28% and Discretionary 1.24% lower.
Australian markets had the wind knocked well and truly out of their sails this afternoon, when the Reserve Bank hiked interest rates by the expected 25 basis points to take the official cash rate to 3.35%.
However, revelations from RBA Governor Philip Lowe off the back of CPI inflation over the year to the December quarter hitting 7.8% – the highest since 1990 – flagging more interest rate rises to come sent the market tumbling almost immediately by 0.5%.
“In underlying terms, inflation was 6.9 per cent, which was higher than expected. Global factors explain much of this high inflation, but strong domestic demand is adding to the inflationary pressures in a number of areas of the economy,” Lowe said in a statement.
“Inflation is expected to decline this year due to both global factors and slower growth in domestic demand. The central forecast is for CPI inflation to decline to 4¾ per cent this year and to around 3 per cent by mid-2025.
“Medium-term inflation expectations remain well anchored, and it is important that this remains the case.”
The move by the RBA to lift rates is the ninth such rise in a row, and was about as shocking as the Grammy Awards unveiling the new “Dr Dre Global Impact Award”, before promptly awarding it to… Dr Dre.
— David Friend (@dfriend) February 6, 2023
I don’t think any of us saw that one coming.
Meanwhile, the apparent demise of BNPL darling Openpay (ASX:OPY) has sent something of a shockwave through that particular section of the market, after the company was simply unable to garner enough interest to raise more capital.
For a comprehensive look into what’s happened and what it all means, Stockhead’s very own Eddy Sunarto has put together another top-shelf explainer right here, but the gist of it is as follows:
The good news is that the federal government is planning on bringing all BNPL companies under the National Consumer Credit Protection Act, which means more credit checks and (hopefully) a drop in the quantity of bad loans in the sector.
The bad news is that users of the Openpay platform are no longer able to use it to make purchases.
The worse news is that users of the platform will still have to pay back the money they’ve spent on whatever super-important stuff they couldn’t bear to wait four weeks to buy.
Overseas, and markets have been doin’ their thang, because that’s what they do.
In the US overnight, it was all a bit saggy as US fears about inflation married to concerns over the ultra-rapid deflation of that Chinese “weather balloon” severely dampened risk appetite among investors.
The S&P 500 closed 0.60% lower, the tech-heavy Nasdaq was down by 1% while the Dow eked out the best of the day’s results, down by just 0.10%.
The ongoing ructions about Chinese surveillance dirigibles wafting over the continental United States developed further on news that US President Joe Biden offered to brief former president Donald Trump’s security people over what the previous administration might have done about three similar balloons China sent to take a stickybeak at the US while Trump was in the White House.
Pentagon officials had previously confirmed that the Trump administration failed to inform the US public of the balloons, causing a number of conspiracy-minded Americans to lose their minds. #BalloominatiConfirmed.
Asian markets have performed reasonably well throughout the day, though – Japan’s Nikkei is up 0.13%, the Hang Seng has climbed 1.04% and Shanghai is doing its best to maintain neutral buoyancy, adding 0.3% as the day there winds to a close.
Here are the best performing ASX small cap stocks:
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This morning’s bolter has held onto top slot on the winner’s chart today – EV Resources (ASX:EVR) is up more than 46%, after the explorer revealed it has entered an agreement for a $25 million investment commitment from Sapphire Global Energy Fund.
The cash will be used to “strategically acquire projects and as working capital to develop further the Company’s current portfolio, including but not limited to drilling campaigns and funding towards JORC compliant mineral resource estimates of the projects”.
“The investment commitment is another major milestone that will enable us to grow significantly over the next 12 months,” EV Resources executive director Navin Sidhu said.
“We look forward to implementing our vision to become a strategically diversified explorer and developer of precious and green energy metals. Sapphire is very supportive of the company and realises the potential we have, thus they have provided us with an extremely competitive and sizeable facility.
“This facility enables us to drawdown when necessary, allowing us to better manage our funding needs, reduce dilution and not be at the mercy of the markets.”
Newly-listed Battery Age Minerals (ASX:BM8) has put in a solid day on the bourse, climbing 34.4% over the course of the day, with news of the appointment of former senior Pilbara Minerals (ASX:PLS) manager Nigel Broomham as General Manager of Exploration.
Broomham brings more than 12 years worth industry experience, including over 10 years in the battery metals sector, specifically in lithium and manganese.
During his time with Pilbara as Head of Geology, he was “extensively involved in the exploration and development of the world-class Pilgangoora Lithium-Tantalum Project in the Pilbara region of Western Australia and was tasked with leading the geology team from exploration through to production,” Battery Age says.
C29 Metals (ASX:C29) is up more than 28% on news that its maiden hole has intersected a 30m brine aquifer at its Pocitos 7 project within Argentina’s Salta Province.
With brine samples taken for assaying and testing using Ekosolve direct lithium extraction technology, flow testing of the aquifer that was intersected from a depth of 370m achieved a pumping rate of more than 2,000 litres an hour using a 49mm pipe and a submersible pump.
This is a strong indicator that the aquifer is easily capable of delivering brine flow rates required for production should assaying prove that lithium is present in the desired quantities.
“We are extremely pleased to intercept brines and have hit a 30m or more aquifer zone at Pocitos 7 and have such a healthy pump rate particularly given the size of the pipe and pump utilised,” C29 director Jeremy King said.
Early mover this morning Omnia Metals (ASX:OM1) has eased somewhat, from more than 35% to finish the day closer to +20% – still not a bad day’s work.
Omnia soared this morning on news that it has moved to increase its exposure to the future metals sector by entering into an earn-in agreement to acquire up to a 100% interest in 540km2 of granted claims in the James Bay region, Quebec, Canada.
Omnia has the option to earn-in up to a 100% interest of the rights to the Lac des Montagnes project, made up of three highly prospective properties – Senay Lithium (136km2), Lac des Montagnes Lithium Central Zone (98km2) and Lac des Montagnes Lithium East Zone (306km2).
The Lac des Montagnes Belt is host to Namaska Lithium’s (TSXV:NMX) world class Wabouchi lithium deposit (36.7Mt @ 1.16% Li2O) which is located 38km along strike from the project.
Here are the least best performing ASX small cap stocks:
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Fresh from the Federal Court of Australia (and the reason for a trading halt this morning prior to the judgement being announced, as listed below), software firm Nuix (ASX:NXL) has successfully defended against a $183 million claim by its former chief executive Peter Sheehy.
The Federal Court found that although former chief executive Eddie Sheehy held 453,273 options in the business, and despite winning an earlier NSW Supreme Court case, he was not able to exercise them when the company listed in 2020, per The Australian.
Mr Sheehy had taken Nuix to court, arguing it should have applied a 50:1 share split to his options, in a move similar to that applied to other option holders in the business ahead of its market listing.
However, Justice John Halley found that Sheehy had “not established that there was any lack of good faith or that no reasonable board could have come to the decision that the number of Nuix shares that would be issued on the exercise of the Remaining 2008 Options would not, by reason of the Share Split, be 50 times the number of options exercised”.
While Sheehy still has avenue to appeal the decision, Nuix shares are trading 34.8% higher following the court’s decision today.
Meanwhile, Argonaut Resources (ASX:ARE) says that the Zambian High Court has ordered the Minister for Mines to decide an appeal by an Argonaut subsidiary, Mwombezhi Resources, against “the purported cancellation of the Lumwana West licence and the hasty and illegal re-grant to a newly registered company”.
The development comes two months after the suspension of both the cancellation and subsequent re-granting of the licence, and marks an important step for Argonuat in its fight for the prompt reinstatement of the Lumwana West licence in north-western Zambia to the Company’s 90%-held subsidiary.
Nuix (ASX:NXL) – Halt called ahead of judgment delivery by the Federal Court of Australia.
New Talisman Gold (ASX:NTL) – Halt requested to complete a 1 for 10 share consolidation.
CardieX (ASX:CDX) – Capital raising.
IPB Petroleum (ASX:IPB) – Capital raising.
Emu (ASX:EMU) – Equity raising.
Anteris Technologies (ASX:AVR) – Capital raising.