ASX drops 0.4pc following cash rate hike
Derek Rose |
The Australian sharemarket has dropped modestly while the Aussie dollar has risen, after the Reserve Bank hiked the cash rate for the first time in more than a decade.
The benchmark S&P/ASX 200 index closed down 30.8 points, or 0.42 per cent, to 7,316.2 on Tuesday, while the All Ordinaries finished 36 points, or 0.47 per cent, lower at 7,587.6.
Both indices had been treading water earlier in the day but fell after the RBA’s mid-afternoon decision to raise the cash rate by a higher than expected 25 basis points.
“I think everybody was expecting a rise – obviously it was more than the market forecast,” said Evan Lucas, chief market strategist at InvestSMART Group.
“But it’s more their expectations around where inflation will be at the end of the year – above six per cent. And they don’t see it slowing down until 2024.
“Further rate rises are coming in a big, big way. I think that’s the big takeout about what’s going on.”
Higher rates will be good for banks, which make more profit when interest rates are higher, Lucas said. Insurance companies also stand to benefit.
Shares in all four big banks edged higher immediately after the news, with Westpac closing up 0.1 per cent to $23.90, and the others trimming their losses.
But Lucas said that low rates are problematic for “anything exposed to growth, that obviously needed the low interest rate environment”, such as buy now, pay later companies.
“They’re going to find it very hard – lower consumer spending and a higher cost of funding,” he said.
Still, tech stocks were the biggest gainers on Tuesday following a strong lead from Wall Street, collectively rising 0.9 per cent. Block rose 4.6 per cent to $148.47 and Xero added 2.0 per cent to $91.83.
Industrials and healthcare were the two other sectors in the green, while eight of the ASX’s 11 official sectors lost ground.
Property shares were the worst performers, collectively falling 1.4 per cent as rising rates promised to make the sector less appealing.
Industrial warehouse owner Goodman Group fell 1.5 per cent and Westfields owner Scentre Group dropped 1.7 per cent, although Dexus rose 1.3 per cent after announcing occupancy of its office towers and rent collections remained strong.
The heavyweight mining sector dropped 1.0 per cent, with BHP down 0.7 per cent to $47.66, Rio Tinto falling 1.5 per cent to $111.85 and Fortescue dropping 4.8 per cent to $20.61.
Woolworths was up 0.4 per cent to $38.44 after the supermarket giant said third quarter group sales were up 9.7 per cent to $15.1 billion compared with a year ago, despite ongoing supply chain disruptions.
Woolies’ e-commerce sales grew strongly in the quarter, rising 38 per cent to $1.1 billion, as more customers opted for online delivery and click-and-collect.
Endeavour Group dropped 1.3 per cent after advising that Dan Murphy’s managing director of the past two years, Alex Freudmann, was departing his role to return to the United Kingdom.
AGL was down 3.2 per cent to $8.35 after acknowledging that its largest shareholder, billionaire Atlassian co-founder Mike Cannon-Brookes, intends to vote his 11.3 per cent interest in the company against its planned demerger.
AGL’s board said it remained committed to splitting up the company, which Cannon-Brookes contends it is bad for both shareholders and the environment.
Cleanaway fell 3.2 per cent after the waste management company announced its second-half earnings would be $15 million to $20 million less than expected because of rising fuel prices and flood damage to equipment and its industrial landfill in Queensland.
Online retailer Booktopia plummeted 28 per cent to an all-time low of 45 cents after announcing that co-founder and chief executive Tony Nash would be leaving and that its earnings for nine months to March 31 were down 63 per cent to $5.5 million as COVID lockdowns ended.
Booktopia said it would be undertaking several cost-cutting initiatives in the fourth quarter to cope with lower revenue growth rates.
GrainCorp closed at a record of $10.50, up 0.9 per cent from Monday and 27 per cent on the year, after raising its guidance a month ago. Planting conditions have been favourable, and uncertainty sown by the Ukrainian war has boosted demand for Australian grain and oilseeds, the company said.
The Aussie dollar lifted to a four-day high of 71.40 US cents immediately after the RBA’s rate hike decision, although by 1715 AEDT it had eased to 70.88 cents, from 70.58 US cents at Monday’s close.
Looking forward, the US Federal Reserve will hand down its own decision on interest rates early on Thursday, Australia time.
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ON THE ASX:
* The benchmark S&P/ASX200 index finished down 30.8 points, or 0.42 per cent, to close at 7,316.2 on Tuesday.
* The All Ordinaries index dropped 36 points, or 0.47 per cent, to 7,587.6.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 70.88 US cents, from 70.58 US cents when the ASX closed on Monday
* 92.31 Japanese yen, from 91.91 yen
* 67.51 Euro cents, from 66.90 cents
* 56.65 British pence, from 56.20 pence
* 110.41 NZ cents, from 109.61 NZ cents.
AAP
