ASX News LIVE | ASX Opens Higher; RBA Keeps Rates Unchanged at 4.35pc

ASX 200 closed up +1.44% to 7,793.3, with a strong showing after the RBA’s decision to keep rates unchanged at 4.35%.

For more details on the RBA’s decision, read more below, but simply put, there were little signs of a hawkish tightening bias in both the RBA board’s statement and Michele Bullocks press conference.

The RBA reiterated that it was ‘remaining vigilant’ to re-accelerating inflation and would raise rates if things continued, but did little to jawbone markets into thinking that it was likely.

On the Australian benchmarks, all sectors finished in the green, with Utilities ahead today, up +2.82% as AGL Energy gained +7.51% after upgrading its FY24 earnings guidance. Origin Energy also had a strong day, gaining +2.35%.

The top performer on the ASX 200 today was uranium producer Paladin Energy up +8.57%, while Sims was the laggard of today, falling -6.52% after lowering its FY24 underlying EBIT guidance, blaming negative sentiments around global steel markets softening export scrap markets.

The Reserve Bank of Australia’s Governor Michele Bullock is still holding a press conference to discuss the RBA’s decision to keep rates unchanged at 4.35%.

Here are some of the key takeaways I’ve heard so far in the press conference:

Today marks the second year of the current tightening cycle, but the RBA thinks it is ‘on track,‘ with her saying that ‘we think we’ve got it right‘ when it comes to the level of tightness.

Michele Bullock noted off the bat, ‘Things are pretty bumpy,’ acknowledging that recent inflation figures, particularly in services, have shown signs of re-acceleration.

Using the same neutral tone of her usual refrain, she said, ‘we’re not ruling anything out,’ and added, ‘the most recent data reinforces that we must remain vigilant.’

Mrs Bullock then slightly contradicted herself by saying:

‘We have rates at the right level to bring inflation down to the target range next year….getting inflation back to target will take time, and the path will likely to continue to be bumpy.’

When asked if the RBA board considered raising rates, she simply said, ‘The board did discuss raising rates, but the board decided on balance to stay as it was.’

So far, the tone sounds like a cautious ‘higher for a longer’ reality.

The market has responded positively to the RBA’s decision to leave rates unchanged and the notably less hawkish tone of the RBA board’s statement.

Many market watchers had expected tough talk from the RBA as lumpy inflation figures have raised the spectre of re-accelerating inflation.

But reading the statement, which you can read in full here, the board’s guarded tone of uncertainty suggests that they are sitting on their hands for now.

The market reaction was a quick 37bps gain on the ASX 200 and a -0.18% drop in the Australian dollar.

Here is an AI-assisted comparison of the prior statement to this one, highlighting some of the differences.

Tone and substance differences between March and May:

Inflation Trends:

Statement (March 2024): Emphasizes that inflation is moderating and remains consistent with RBA forecasts, with the headline CPI indicator at 3.4% over the year to January. There are signs of easing inflation momentum, particularly in goods, although services inflation is declining more slowly.
Statement (May 2024): Acknowledges that inflation is declining but at a slower pace than expected. The CPI rose 3.6% over the year to March, higher than the January measurement cited in the first statement. Underlying inflation, mainly driven by services inflation, remains high.

Labour Market:

Statement (March 2024): Notes that the labour market is gradually easing but remains tighter than consistent with full employment. Wages growth has picked up but seems to have peaked.
Statement (May 2024): Stresses that labour market conditions have eased over the past year but are still tight. While wages growth has peaked, it remains higher than sustainable levels given current productivity trends.

Outlook:

Statement (March 2024): Describes an uncertain economic outlook but expects inflation to return to the target range of 2–3% in 2025 and reach the midpoint in 2026. The RBA emphasizes risks tied to global economic conditions and domestic uncertainties like monetary policy lags.
Statement (May 2024): Also notes uncertainty and suggests that the process of reducing inflation may not be smooth. The updated forecasts indicate inflation will take longer to return to target levels, partly due to higher services price inflation and rising petrol prices.

Domestic Consumption:

Statement (March 2024): Highlights weak household consumption due to high inflation and rising interest rates, with growth expected to pick up later in the year.
Statement (May 2024): Stresses persistent weak household consumption amid high inflation and rising interest rates, suggesting real income growth may support consumption later in the year, but warns that growth may remain subdued.

Global Outlook:

Statement (March 2024): Focuses on uncertainties surrounding the global economy, including the impacts of conflicts and supply chain disruptions.
Statement (May 2024): While noting some positive trends globally, such as improving prospects in China and the U.S., it emphasizes geopolitical uncertainties and the potential for commodity price impacts.

The Reserve Bank of Australia (RBA) has decided to keep the cash rate unchanged at 4.35%.

This widely anticipated move comes as the central bank continues its efforts to rein in persistent inflationary pressures that have defied its target range of 2 to 3%.

The decision continues the long pause in the RBA’s aggressive tightening cycle, which has seen 13 consecutive rate hikes since 2022. This hawkish stance aims to cool down the overheated economy and bring inflation back to acceptable levels.

However, recent economic data has painted a mixed picture. Inflation surprised on the upside in the March quarter, while the unemployment rate fell to near 50 year lows, fueling expectations of potential further rate increases. Bond traders have priced in a 44% chance of another rate hike in the current cycle.

Despite these expectations, most economists still anticipate that the RBA’s next move will be a rate cut by the end of 2024 or early 2025, as the impact of the tightening measures takes hold.

RBA Governor Michele Bullock will address the media at 3.30 pm today AEST, potentially shedding light on the board’s decision-making process.

This will be the central bank’s first public commentary on monetary policy in six weeks, offering valuable insights into its economic outlook and future policy trajectory.

The ASX 200 rises as we pass midday, currently up +0.47% to 7,718.3 as almost all sectors gain this morning.

Only Financials is down around midday as NAB falls by -2.68% and ANZ is also slightly down (-0.80%) after releasing its latest half-year results.

The top gainer so far today was AGL Energy, up by +7.62%, as the company upgrades its earnings guidance for the year, forecasting EBITDA of $2.12-2.2 billion.

This gain pushed the Utilities sector as the top performer at midday.

Commodities are also having a strong session, with Iron ore prices jumping 2%, we’ve seen strong gains amongst mining giants, with BHP up 1.16% and FMG gaining 1.06%.

The latest per-capita retail data cleaned up by IFM shows households are still feeling the pinch of the cost of living.

Apart from the stronger Black Friday sales, consumer spending has remained subdued amid high inflation and rising interest rates. The cost-of-living crisis has been particularly acute in Australia, where households are grappling with soaring prices for essential goods and services.

According to the Australian Bureau of Statistics, the Consumer Price Index (CPI) rose by 7.8% in the 12 months to the end of 2023, the highest annual increase in over three decades.

Households are feeling the pinch across various sectors, with food and energy prices being the most concerning.

The cost-of-living crisis has also been exacerbated by the RBA’s aggressive interest rate hikes, aimed at taming inflation. As mortgage rates rise, homeowners are facing higher monthly repayments, leaving less disposable income for other expenses.

At 2:30 today, we will hear the latest decision from the Reserve Bank and a press conference from Michele Bullock, so stay tuned for that.

The ubiquitous 'per capita' chart. Q4 2023 saw strong Black Friday sales in volume terms avoiding 6 consecutive falls in retail volumes. Households really pulling back with demand underpinned by population. pic.twitter.com/mtKm4fmmsl

— Alex Joiner 🇦🇺 (@IFM_Economist) May 7, 2024

AGL Energy [ASX:AGL] shares have jumped this morning, up by +5.37%, as the company upgraded its earnings guidance for the financial year 2024 due to higher consumer demand and improved plant availability and generation.

The utility giant forecasted underlying EBITDA to be between $2,120–2,200 million, up from its previous guidance of $2,025–2,175 million.

Underlying net profit after tax was projected at between $760–810 million, up from its previous expectation of between $680–780 million.

The strong gains seen by AGL today have propelled Utilities to the top-performing sector this morning.

In a similar move to Westpac yesterday, ANZ [ASX:ANZ] released its half-year report today and announced $2 billion in stock buybacks.

The big bank’s reports were another ‘OK’ showing, with ANZ reporting a 7% decline in cash profits at $3.55 billion for the first half of the year.

Net interest income dropped by 1% and the banks net interest margin fell 2 basis points, driven by the strong competition seen in mortgage lending.

Source: ANZ

Moody’s Ratings said the result today was ‘credit neutral‘ and widely expected.

ANZ also declared an interim dividend of 83 cents per share, partially franked at 65 cents.

ANZ NZ CEO Antonia Watson said ‘banks reflect the economies they operate in, and New Zealand had entered a more challenging period.‘

Meanwhile, ANZ chief executive Shayne Elliott also noted the ‘challenging‘ environment in Australia and internationally and said the local economy was likely to remain ‘subdued‘.

‘Despite these conditions, we are well positioned with the diversity of our businesses, prudent management, and the strength of our customers holding us in good stead. In fact, our work to build a well managed, de-risked and diversified bank, coupled with our unique international presence, means we are well-placed to succeed in this environment.’

Good morning. Charlie here,

The ASX 200 opened up +0.48% to 7,719.2 this morning as markets extended their bullish sentiment on beliefs that economic conditions will give Central Banks more space to cut.

Another positive day on Wall Street overnight has seen commodities climb and solid gains in the major benchmarks.

First reports of Israel striking Rafah are coming through, which will sadly mean further escalation in the Middle East, we’ll watch commodity prices through the session.

For Australia, the expectation of the RBA’s next interest rate decision at 2:30 p.m. AEST may cause more caution in this morning’s trading.

While many are still expecting rates to remain unchanged at 4.35%, the odds of a rate rise have risen over the past week.

According to the RBA rate tracker, the market is pricing in an 8% chance of a surprise raise today. We’ll be watching this decision closely, as well as the press conference by Michelle Bullock.

Wall Street: S&P 500 +1.03%, Dow +0.46%, Nasdaq +1.19%.

Overseas: FTSE +0.51%, STOXX +0.72%, Nikkei flat SSE +1.16%.

The Aussie dollar rose +0.16% to US 66.22 cents.

US 10-year bond yields -2bps to 4.49%.

Australian 10-year bond yields -4bps to 4.38%.

Gold is up +1.38% to US$2,323.49, while Silver rose +3.68% to US$27.45.

Bitcoin fell -1.34% to US$63,163, while Ethereum fell -2.37% to US$3,062.

Oil Brent rose +0.36% to US$83.63, while WTI Crude rose +0.51% to US$78.88.

Iron ore rose +2% to US$119.70 a tonne.