by Peter Milios
The Australian inflation rate for February was lower than expected, with a rate of 6.8 per cent compared to the forecasted 7.2 per cent. Housing, food and non-alcoholic beverages, and transport saw the most significant price increases. This data supports the case for the Reserve Bank to maintain the current cash rate of 3.6 per cent next month.
In addition, following the release of the data, the Australian dollar fell by 0.2 per cent to US66.94¢. As a consequence, expectations for an RBA rate hike next week have been scaled back, with interbank futures indicating a 3 per cent chance of an increase, down from 18 per cent.
At noon, the S&P/ASX 200 is 0.04 per cent higher at 7,036.90.
The SPI futures are pointing to a rise of 1 point.
Best and worst performers
The best-performing sector is Materials, up 1.01 per cent. The worst-performing sector is Financials, down 0.82 per cent.
The best-performing large cap is ALS (ASX:ALQ), trading 3.81 per cent higher at $11.99. It is followed by shares in Pilbara Minerals (ASX:PLS) and Fortescue Metals Group (ASX:FMG).
The worst-performing large cap is Qube Holdings (ASX:QUB), trading 2.33 per cent lower at $2.94. It is followed by shares in Whitehaven Coal (ASX:WHC) and National Australia Bank (ASX:NAB).
Asian news
Asia-Pacific markets were mixed on Wednesday. Investors will keenly watch Alibaba’s Hong Kong-listed shares, after the Chinese tech giant announced it will split into six business groups.
In Japan, the Nikkei 225 opened marginally lower, but the Topix rose 0.13 per cent. South Korea’s Kospi fell fractionally, while the Kosdaq index rose 0.03 per cent.
Hong Kong’s Hang Seng index is set to rise, with futures at 20,135 compared to the index’s last close at 19,784.
Moving pieces and waiting games
Market struggling for direction with a lot of moving pieces surrounding the monetary policy and growth narratives and the waiting game for meaningful catalysts such as ISM manufacturing and services surveys on 3-Apr and 5-Apr, respectively, the employment report on 7-Apr, CPI on 12-Apr and the start of bank earnings in mid-April. Recent signs of stabilization in the banking sector a positive from a sentiment perspective but fallout (credit crunch) unknown and this dynamic also dents some of the momentum surrounding Fed pivot expectations that have provided a tailwind for big tech. Fed rate hike odds for May back above 50 per cent on Monday while market trimmed 2H rate cut expectations from over 100 bp on Friday to just under 75 bp. Fed balance sheet re-expansion flagged as another bullish talking point but a number of strategists have pushed back against the notion of it as a return to QE given confinement to the banking system. Positioning still cited as supportive though buybacks have been running below seasonal trends (and bulk of S&P 500 about to be in buyback blackout window) and TARA expected to drive net selling from households. Also some debate about the signaling surrounding divergence in (very elevated) bond vs equity market volatility.
March Consumer Confidence, Richmond Fed index both beat
March Consumer Confidence up 1.3 points m/m to 104.2, beating consensus for 101.0. Present situations index fell 1.9 points to 153.0. Expectations index up 2.6 points to 73.0, though report noted expectations index remained below 80 for 12th month of past 13, which has historically signaled recession within the next year. Labor market differential fell 2.1 points to 38.8, all driven by a decline in those that say jobs are “plentiful,” which fell from 51.2 to 49.1. However, assessment of short-term labor market outlook improved, while consumers were less pessimistic about short-term business conditions outlook. However, Conference Board economists also noted that expectations on inflation over next 12 months remain elevated at 6.3 per cent. March Richmond Fed Index rose 11 points m/m to -5, beating estimates for -8 and first increase since December. Shipments index a big tailwind, rising 17 points m/m to 2. Also noted growth in prices paid decreased moderately, while growth in prices received was little changed, while firms expect both to moderate over next year.
Company news
Mamba Exploration (ASX:M24) has announced that their drilling has identified wide clay rare earth elements at their Hyden Project in WA. In response, Managing Director, Mike Dunbar said, “While we are surprised by the width and consistency of the mineralisation, it is also surprising that the mineralisation is so shallow, with little or no surficial cover over the clay mineralisation.” Shares are trading 60 per cent higher at 12 cents.
Globe Metals & Mining (ASX:GBE) has announced that the Malawi Government approves MDA for the development of their Kanyika Niobium Project. Globe Chairperson, Alice Wong, commented, With this ultimate approval and final agreement in place, all parties concerned can now focus their efforts and resources on making the Kanyika Project the first niobium mine in Africa.” Shares are trading 19.1 per cent higher at 10 cents.
Walkabout Resources (ASX:WKT) has signed a term sheet with Gemcorp, an emerging fund manager, for up to US$25 million to complete construction of the Lindi Jumbo Graphite Mine in Tanzania. CEO of Walkabout Resources, Andrew Cunningham commented; “Having Lindi Jumbo more than 85 per cent complete to cost prior to the first drawdown, provides a significantly different base for project debt than any of the prior arrangements.” Shares are trading 9.1 per cent higher at 12 cents.
Commodities and the dollar
Gold is trading at US$1782.70 an ounce.
Iron ore is 1.7 per cent higher at US$123.70 a tonne.
Iron ore futures are pointing to a 1.65 per cent rise.
One Australian dollar is buying 67.07 US cents.
