ASX LIVE | RBA keeps rates on hold at 4.10%; PMT Sells 5% to Lithium Giant, Credit Corp Profits Down 5%

ASX closed up 0.69% at 7,461.4 today after the RBA decided to keep rates on hold for the second consecutive time. Many now think the RBA has come to the end of its interest rate hike cycle, but this month’s CPI data will be the final nail in the coffin for many market watchers’ prognostications.

The best individual performers:

• TPG Telecom [ASX:SCG], up 11.55%
• Gold Road Resources [ASX:GOR], up 8.57%
• Paladin Energy [ASX:PDN], up 4.76%
• De Grey Mining [ASX:DEG], up 3.37%
• IGO Ltd [ASX:IGO], up 3.19%

The worst performers:

• Credit Corp Group [ASX:CCP], down 12.59%
• AUB Group [ASX:AUB], down 2.69%
• Infratil [ASX:IFT], down 2.56%
• Yancoal Australia [ASX:YAL], down 2.35%
• Challenger [ASX:CGF], down 2.09%

The RBA’s decision today could be heard from the collective sigh from mortgage owners around Australia who have been struggling with high interest rates since the RBA began its tightening cycle last year.

The average mortgage rate of a relatively recent owner-occupier was approximately 6.80% in June.

This was in part due to the large number of homeowners who were on variable rates or whose fixed-rate loans expired as interest rates began to rise.

Source: ABS

A further 28% of current fixed-rate loans will expire before the end of the year, followed by 38% in 2024.

These mortgages account for an average of around 25.1% of a household’s disposable income. When the RBA began the tightening cycle, they released a paper estimating that the service rates for mortgages would not get over 9% of disposable income.

Compare this to the United States, where only 11% of household debt has adjustable interest rates.

Source: Moody

You can see why the American economy has dodged the sting of 11 Fed rate hikes so well, as the US market remains insulated from the pain and consumers continue to spend.

US household debt service sits in the single digits as a percentage of disposable income.

If Australia’s inflation continues to fall, the RBA must ensure that it doesn’t overdo further hikes to ensure that these homeowners aren’t crushed by these debts and continue to spend in the economy.

Source: Charlie Bilello

The ASX 200 is now up 0.69% today at 7,461.4 after the RBA’s decision to keep rates on hold for another month.

Meanwhile, the Aussie dollar has dipped down to US$ 66.68 cents.

Three-year and ten-year bond yields also dipped after the news.

While many investors expected this news, now the next question will be if this is an extended pause or the end of this tightening cycle.

Source: TradingView

The RBA has decided to hold interest rates steady at 4.10%.

This is the second consecutive month that the RBA has held rates steady, with many now thinking this may be the peak rate for this tightening cycle.

The RBA commented today, saying it was still too early to assess the full impact of recent rate hikes, but noted that Australia was experiencing a period of below-trend growth.

Inflation currently sits around 6%, well above the RBA’s 2-3% target range.

The board reiterated that the RBA is prepared to raise rates further if necessary to bring inflation back to target, though some question the need with last month’s CPI data falling more than forecast.

All eyes will be on the inflation and labour data in the coming month to indicate if the RBA has done enough to curb inflation.

A survey conducted by LGT Crestone asked the 1000 wealthiest families in Australia shows an interesting mix of portfolios.

The allocations, seen below, indicate the wealthiest are moving away from traditional equities into alternative markets and bonds as methods to avoid high inflation.

Other interesting insights were the high percentages of cryptocurrencies and ETFs within the groups.

Respondents were also asked about the outlook of Australian and global markets. The majority expected both the global economy (49%) and the domestic economy (42%) to be worse in the next 12 months, while the rest were split between unsure and positive.

Source: LGT Crestone

Reserve Bank of Australia’s interest rate decision is due in the next 15 minutes. The ASX 200 rose 0.4%, or 20.1 points, to 7441.7 points early afternoon.

The materials and IT sectors led the gains, up 1% and 0.8%, respectively today.

Iron ore miners were up BHP (1%) and Fortescue Metals (1.71%), following declines last week on the back of a poorer outlook for Chinese demand. Rio Tinto was down 0.15%.

Gold stocks also gained, with Newcrest rising 2%, Northern Star up 1.5%, and small-cap Gold Road Resources climbing 8.89%.

Credit Corp fell 13.86% after it reported a 5% drop in net profit for the full year.

Shares in Patriot Battery Metals surged by 10.27% following news of a $120 million share placement with chemicals giant Albemarle.

US Tech stocks remain the centre of news as they continue their unexpected bull run through turbulent times.

Here are their earnings when compared to last year and total returns when both years are combined.

Are they overvalued or wildly overvalued?

2022/2023/2022-23 Combined Total Returns…$NVDA: -50%/+220%/+59%$AAPL: -26%/+52%/+12%$MSFT: -28%/+41%/+1%$SPY: -18%/+21%/-1%$QQQ: -33%/+45%/-3%$META: -64%/+165%/-5%$GOOGL: -39%/+50%/-8%$AMZN: -50%/+59%/-20%$TSLA: -65%/+117%/-24%$NFLX: -51%/+49%/-27% pic.twitter.com/xmAF8pFN0J

— Charlie Bilello (@charliebilello) August 1, 2023

The reduction of supply from OPEC+, especially oil heavyweights Saudi Arabia and Russia, has seen oil prices climb the fastest since January 2022.

Russian and Saudi officials said they would cut oil exports by 500,000 barrels a day in August.

‘Record high demand and Saudi supply cuts have brought back deficits’, said Goldman Sachs analyst Daan Struyven said in a note, ‘the market has abandoned its growth pessimism.’

This optimism has been on the back of increasingly strong indicators out of America, showing lower-than-expected unemployment and resilient housing.

Meanwhile, data from china shows the economy has contracted again through July. Chinese officials again promise more stimulus but have yet to outline any concrete steps.

Source: Bloomberg- Nymex

Credit Corp Group [ASX:CCP] released FY23 financial results today, showing an overall positive year with some mixed results in the mix.

Highlights from the release:

• 70% growth in lending segment NPAT
• 43% growth in consumer loan book to a record gross closing balance of $358 million.
• Net Profit After Tax (NPAT) is down by 5% YoY to 91.3 million

NPAT fell despite the increases due to the continued run-off in the core AU/NZ debt-buying business and costs arising from increased US resourcing to try to recover the slower than hoped growth there.

CCP will pay a final dividend of 47 cents per share.

ASX 200 opens up 0.17% at 7,422.6

The ASX opens up as the bull run continues in the US, while Asian markets are up on more news out of China, with officials there vaguely promising more stimulus after more negative news from PMI data. This time Chinese officals said they will also be targeting consumer spending, with economists expecting voucher progams to help bolster the flailing economy.

• $AUD up +0.92% at 67.18 US cents
• ASX futures flat +0.05% to 7,385.5
• S&P 500 up +0.15%
• NASDAQ up +0.21%
• DOW up +0.28%
• FTSE flat +0.067%
• STOXX up +0.38%
• SSE up +0.46%
• Bitcoin down -0.19% to $US 29,227.12
• Spot gold up +0.23% to $US 1,964.31
• Iron ore down -0.19% to $US 112.69
• Brent Crude up +0.67% to $US 85.56pb

All figures shown are from 10:10am AEST

Patriot Battery Metals Inc [ASX:PMT] and Albemarle Corporation announced today a strategic investment of C$109 million. Under the terms , Albemarle buy common shares of Patriot at a price of C$15.29 per share. This is a 7% premium to the closing price of Patriot’s shares.

Upon closing of the deal, Albemarle will own approximately 4.9% of Patriot’s issued and outstanding shares on a fully-diluted basis. The proceeds from the investment will be used to accelerate the development activities at Patriot’s Corvette Lithium Project.

Blair Way, Patriot President and CEO, commented on today’s news:

‘We could not be more pleased to have welcomed Albemarle to invest in Patriot. I believe both Patriot and Albemarle can be a big part of building out the required front-end to the lithium chemicals supply chain in North America and Europe over the coming years. The additional funding will allow us to more aggressively advance the Corvette Property through drilling, permitting, study work and more.’

Good morning all, with you today to cover all the biggest news, including the Reserve Bank of Australia’s big decision due at 2.30pm.

There remains some uncertainty about the decision today, with Interbank futures pricing in a 14% chance of a rate increase at the RBA’s August policy meeting. This is down from 48% before last week’s inflation data, which showed that inflation softened more than expected in the June quarter.

Economists appear to be more bullish than the market, with 20 out of 36 respondents in a Refinitiv survey forecasting that the central bank will raise rates for the 13th time this cycle. Westpac’s outgoing chief economist, Bill Evans, predicts a 25-basis-point move today.