Miners and banks have weighed the ASX down today.
The S&P/ASX200 is dropped just 3.80 points today to 7,251.90. Over the last five days, the index has gained 0.44% and is currently 4.17% off of its 52-week high.
The bottom performing stocks in this index are Silver Lake Resources Ltd and Paladin Energy Ltd (ASX:PDN) down 4.89% and 3.87% respectively.
Looking at the sectors, Information was the best performed at 1.44% higher, while Utilities crashed by 1.10%.
Rate hike risk reduced in the US
Headline inflation is continuing to moderate in the US.
Headline CPI rose 0.4% month-over-month in April, driven by a rise in energy prices. However, it was firmly in line with consensus expectations. Annual headline CPI eased from 5.0% to 4.9% in April.
Core CPI (which excludes food and energy prices) rose 0.4% month-over-month, also in line with expectations, while the annual rate ticked down slightly from 5.6% to 5.5%. Annual core inflation has been hovering at 5.5%-5.6% since the start of the year and has shown minimal improvement.
Seema Shah, Chief Global Strategist, Principal Asset Management notes, “the Consumer Price Index (CPI) for April showed that headline inflation continues to moderate, dipping below 5% for the first time since April 2021. Headline CPI is now below the Fed funds rate, reducing the need for additional Federal Reserve (Fed) tightening. However, annual core inflation failed to show clear deceleration, sitting at 5.5%—a level it’s hovered around since the start of the year.
“Inflation remains too elevated, and the deceleration is proving slow. Yet, after the strong April jobs report, the Fed will be comforted by the fact inflation has not increased. Today’s CPI number likely reinforces the Fed’s policy slant towards a rate hiking pause.”
Shah believes there is only a small chance of an increase in July.
“Today’s inflation report applies little pressure on the Fed to hike again next month and, indeed, markets are now only pricing in a very small probability of a June increase. There is a tentative deceleration in the important core services ex-housing figure, likely justifying a wait-and-see approach from the Fed.
“Nonetheless, price pressures remain too elevated to justify current market expectations for rate cuts later this year. For rate cuts to come into play, the Fed will need to see a significant deterioration in the labor market which, in turn, weighs heavily on price pressures, or a spiraling banking crisis which puts financial stability at the forefront of the Fed’s focus. Neither scenario is on the board yet.”
Cobalt is a long-term solution to a green energy transition
The Cobalt Institute published its Cobalt Market Report today, which confirmed the long-term role of cobalt as part of the solution to a green energy transition.
The report notes that Indonesia has become a key growth market for cobalt, while cobalt-containing batteries maintained strong share in the EV market.
“The cobalt industry is optimistic the cobalt market will continue to grow in the coming years, driven by the success of cobalt’s use in superalloys and hard metals, and particularly in EVs. Cobalt-containing batteries are key for EVs safety, performance and stability – a factor that will continue to define consumer preferences in Europe and North America,” Cobalt Institute interim director general Caroline Braibant said.
The report shows Indonesia became the second largest cobalt producer, overtaking established producers including Australia and the Philippines. With 5% of 2022 supply, Indonesia has the potential to increase cobalt production by 10 times by 2030, with new projects being announced on a regular basis. The Democratic Republic of Congo maintained a steady share of 73% of production.
2022 was a turbulent year for cobalt demand, however it maintained an annual growth of 13%, reaching 187 kt. The cobalt market prospects remain robust as cobalt demand is set to double by 2030, growing at a 10% annual rate.
In 2022, the EV sector was the strongest performer, now accounting for 40% of the total cobalt market. Because of its exceptional properties, cobalt is expected to remain a key raw material for the entire battery supply chain, despite discussions on substitution. Cobalt-containing chemistries represented 63% of cathode demand in 2022. They will remain a critical part of the EV sector and are expected to prevail in Europe and North America.
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