The ASX was led higher by miners today.
The S&P/ASX200 was up 41.20 points or 0.60% to 6,933.70. Over the last five days, the index has gained 0.98% but is down 6.90% for the last year to date.
Two top-performing stocks in this index were Capricorn Metals up 9.43% and Lake Resources NL (ASX:LKE, OTCQB:LLKKF) up 6.51%.
Capricorn was a market favourite after it announced its mineral resource estimate increased by 32% to 2.75 million ounces from 2.08 million ounces.
Lake Resources appointed the highly experienced Karen Greene to the corporate team as a senior vice president to lead investor relations and assist the company in its growth ambitions.
Looking at the sectors, materials was the big winner up 3.52%. Energy was the next biggest gainer, finishing 1.25% higher. Most sectors were marginally higher at the end of trade. On the downside, Information Technology took a 2.24% hit, while Financials dipped 1.45%.
In the news this week
Three things to watch for the week ahead
Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia this week.
1. Speech from RBA Deputy Governor Michele Bullock - are rates higher for longer?
After last week's second consecutive 25bps rate hike, investors will be keen to hear from RBA deputy governor Michele Bullock this week. Last week, the RBA once again reiterated that “the size and timing of future interest rate increases will continue to be determined by the incoming data”.
After the red-hot inflation reading late in October, a 50bps move would have been on the table for the RBA, so it will be interesting to hear if the deputy governor gives us any insight on the board’s decision to stick with a 25bps move.
Will her tone also be hawkish? Although the RBA was the first global central bank to pivot, they have recently insinuated that rates will stay higher for longer and wouldn’t be afraid to increase the size of hikes if inflation doesn’t begin to ease.
Clearly, the RBA feels it can afford to be patient in waiting for inflation to slow, with ideally only a soft landing rather than a recession for the economy, a luxury other economies don’t have. The key risk with this approach from the RBA is if inflation remains more entrenched in the economy than they have anticipated.
2. US CPI - Sticky Core Inflation is a headache for the Fed
After last week's 75bps move from the Federal Reserve and Jerome Powell’s comments suggesting it was too premature to talk about a pause, this week’s US Inflation reading will be the market event to watch.
Many will want to see the Federal Reserve step down its rate hikes to 50bps in December and begin to pause in the first half of 2023, but inflation is not falling as quickly as the Fed would like.
If inflation does come in hot this week, markets will further price in another 75bps move from the Fed in December, which will likely have a significant impact on markets. The Fed has also expressed concern about inflation becoming entrenched, so taking its foot off the gas may be a risk they are unwilling to take right now.
Although headline inflation is 'expected' to fall again, the market will be focusing on core inflation, which has given Jerome Powell and the committee a headache due to its stickiness, rising again last month to 6.6%, the highest reading so far in 2022.
3. CBA Household Spending Data - rates rise again, so are consumers spending?
The CommBank Household Spending Intentions Index looks at the payments data from Australia’s largest bank and gives us an insight into the everyday consumer and their current spending habits.
Consumer confidence surveys continue to show that Australians are more pessimistic about the economy than they have been in years, but on the other hand, these same consumers continue to spend, with retail sales increasing for the ninth consecutive month, up 0.6% from August.
As the RBA continues to raise interest rates, we can expect household spending to slow as demand cools. The key question will be whether the RBA's rate hikes are already having the desired effect on the average household.
Last month’s reading showed a decline in the index for the first time since April but with the holiday season just around the corner, homes may continue to spend into the end of 2022. This would likely be when households really start to feel the squeeze of cost-of-living pressures and the increase in mortgage payments.
RBA’s role in climate change
The Centre for Policy Development (CPD) has earmarked an expanded climate role for the central bank, so it can steer the Australian economy through an orderly energy transition.
The CPD believes a stronger climate role for the RBA will help Australia navigate the transition to net-zero smoothly, without damaging the financial system.
A Treasury submission by the CPD said the RBA review should consider updating the central bank’s 63-year-old legislative mandate to consider sustainability, climate risks and opportunities, and the maintenance of net-zero carbon emissions.
Recommendations also include an expanded role for green bonds in line with international practice, more advice from the bank on economic responses to climate change, clear risk disclosure, and tighter expectations on corporate bond issuers.
The submission draws on CPD’s history of work on the economic and legal frameworks needed to navigate climate change.
In 2019 CPD hosted a landmark address by then-RBA Deputy Governor Dr Guy Debelle in which he emphasised the importance of an orderly climate transition to financial stability, saying, “Decisions that are taken now can have significant effects on future climate trends and can limit or eliminate the ability to mitigate the effect of those trends,” and that, “Financial stability will be better served by an orderly transition rather than an abrupt disorderly one”.
This followed the influential Hutley Hartford-Davis opinions which led to interventions on climate risk and greenwashing by the corporate and banking regulators, and Treasury.
Earlier this year, CPD published a discussion paper on the interactions between inflation and climate change, as well as Raising the Bar, a report on climate governance in government-owned corporations.
Centre for Policy Development Sustainable Economy director Toby Phillips said financial stability could only be assured with an orderly climate transition and that the central bank should play a central role in delivering it.
“Australian wellbeing depends on an orderly transition to a steady net-zero economy and a sustainable natural environment.
“Updating the RBA toolkit so it can protect Australian wellbeing with a stable financial system and a smooth transition is the most sensible reform we can make.
“The Reserve Bank is governed by a 63-year-old law that requires the RBA Board to contribute to economic prosperity and welfare. It makes sense to update this mandate to account for the realities of climate change and the need for a swift, just and orderly transition to net-zero emissions to maintain the stability of the financial system.
“The impacts of climate change are already with us and the costs they impose on us are real and growing.
“An orderly transition to a net-zero economy requires alignment across all aspects of policymaking, including the Reserve Bank’s control of monetary policy."
Five at five
Global Health secures key contract for Acurio’s new health and wellbeing hub in NSW
Global Health Ltd (ASX:GLH) has secured a key contract with Acurio Health Group to provide its MasterCare PAS, patient portal, data warehouse and e-switch Integration engine to Acurio’s new health and wellbeing hub, The George Centre.
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Artrya gains UK regulatory approval for Salix Coronary Anatomy product
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Arovella Therapeutics secures European patent for iNKT cell therapy platform
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Altech Chemicals launches CERENERGY 60KWh battery pack design for renewable energy storage
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Celsius Resources delivers maiden resource of 1.2 million tonnes of copper and 1 million ounces of gold at Sagay in Philippines
“The copper mineralisation at Sagay is truly large scale, with potential to develop into another significant copper deposit in the Philippines,” said Celsius Resources Ltd (ASX:CLA) director Peter Hume.
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Future of oil not so bleak despite momentum towards energy transition
The combined market share of oil and gas in the global primary energy mix is expected to remain above 50% in 2045.
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The one to watch
Northam Resources aims for $6 million in IPO to advance nickel-copper-PGE portfolio
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