As widely expected, the Reserve Bank of Australia (RBA) raised the official interest rate by 0.5 percentage points yesterday, taking it to 1.35%, as widely expected.
This is the fastest back-to-back increase in interest rates since increases of 0.75% and 1% in November and December 1994, respectively. But the RBA remains upbeat on the economy and employment, despite remaining concerned about the risk of rising inflation expectations.
ASX soothed by upbeat outlook
The Australian share market was soothed by a relatively upbeat accompanying statement by Reserve Bank of Australia governor Philip Lowe; after saying last month that he expected inflation to peak at 7 per cent, the governor said yesterday that he expected inflation to peak later this year and then decline back to the 2 per cent to 3 per cent range next year, which presages possible rate cuts in late 2023.
The S&P/ASX 200 (INDEXASX: XJO) advanced 0.3 per cent, or 16.7 points, to 6629.3, while the All Ordinaries (ASX: XAO) lifted 21.2 points, or 0.3 per cent, to 6818.1. The major banks were lower before the rates announcement but rose afterwards to cut their losses. ANZ Banking Group (ASX: ANZ) lost 8 cents, or 0.4 per cent, over the day, to $22.20; National Australia Bank (ASX: NAB) fell 9 cents, or 0.3 per cent to $27.65; Commonwealth Bank of Australia (ASX: CBA) eased 22 cents, or 0.2 per cent, to $91.23; and Westpac Banking Group (ASX: WBC) ended unchanged, at $19.67.
Tech shares & gold glitter
The tech stocks had a good day, with the sub-index rising 1.7 per cent, led by Wisetech Global Ltd (ASX: WTC), which gained $2.00, or 5.2 per cent, to $40.70; while Xero Ltd (ASX: XRO) rose $1.83, or 2.3 per cent, to $80.64, and Afterpay owner Block (ASX: SQ2) added $1.83, or 2 per cent, to $94.35.
Life360 (ASX: 360), which provides location-based services to help family members track each other, jumped 33 cents, or 11.3 per cent, to $3.24, which was a remarkable effort given that the company had no news to report. It was the same story – or lack thereof – with US-based artificial intelligence chip maker Brainchip (ASX: BRN), which added 9 cents, or 10.6 per cent, to 94 cents.
At least gold miner Regis Resources (ASX: RRL) reported a 20 per cent lift in gold production in the June quarter, to 123,900 ounces, and 437,300 ounces for the financial year, which was within its guidance range, to earn its rise: Regis shares surged 15 cents, or 10.7 per cent, to $1.60. Fellow gold producer St Barbara Ltd (ASX: SBM) up 7 cents, or 8.5 per cent, to 90 cents, amid speculation of a merger with regional neighbour Genesis Minerals (ASX: GMD), and also in the gold sector, Westgold Resources (ASX: WGX) reported record gold production for the 2022 financial year of 270,878 ounces which was in line with its guidance, and was rewarded with a 7-cent, or 5.7 per cent rise, to $1.29.
US mulls recession
Back from their holiday overnight, the US markets were down heavily in the early part of the day, as investors’ worries about recession grew, but rebounded in the afternoon. The 30-stock Dow Jones Industrial Average was down nearly 700 points at one stage but recovered to trim its loss to 129.4 points, or 0.4 per cent, to 30,967.8. The S&P 500 index was down more than 2 per cent, but in the end, it managed to eke out a 6-point rise, to 3,831.4. The tech-heavy Nasdaq Composite Index was the best performer, gaining 194.4 points on the day, or 1.8 per cent, to 11,322.2. Energy stocks were hammered as US oil prices dropped below US$100 a barrel, on fears of a recession, to end at their lowest point since April.
The Australian dollar is buying 68 US cents this morning.