The ASX had a solid day in trading today after setting a 20-day low yesterday.
The S&P/ASX200 turned up sharply, gaining 119.40 points or 1.77% to 6,848.70. Over the last five days, the index is virtually unchanged, but is down 8.00% for the last year to date.
Top-performing stocks in this index were Tyro Payments Ltd up 27.92% and Life360 Inc up 16.36%.
Tyro had rocketed 26% in morning trading after it rejected an unsolicited, non-binding and indicative takeover proposal from a consortium of private equity investors led by Potentia Capital Management.
The consortium includes HarbourVest (LSE:HVPE) Partner, MLC Investments Limited and The Construction and Building Unions Superannuation Fund. It offered Tyro a $1.27 per share and shareholders would have had the option to receive their consideration in the form of 100% cash; 50% cash and 50% scrip; or 100% scrip in a privatised Tyro, subject to scale-back.
One of the biggest losers was Woodside Energy Group, which was down 5.53% as the oil price took a hit to the lowest levels since the beginning of the year.
Woodside was down 5.50% after being in the red by as much as 7.1%, with the energy sector falling 4.4% before settling at a 2.2% drop.
Many energy companies were hit with Santos Ltd (ASX:STO) down 2.2% and Beach Energy (ASX:BPT) Ltd losing 1.4%.
The Brent crude price dived 5.2% to $US88 per barrel, a level it hasn’t seen since February this year.
Of the other sectors, most were in the green: Materials was up 2.42%, Industrials was 1.53% higher, Consumer Discretionary gained 1.92%, Healthcare +1.86%, Financials 1.60%, Information Technology +2.68%, Utilities +1.86%, Real Estate +2.37% and Utilities gained 1.86%.
Making news today
Slowing rate rises
Reserve Bank of Australia (RBA) governor Phillip Lowe has flagged a slowing down of rate rises after yesterday’s 0.5% hike.
The ANZ Bank expects rate rises to slow in November, flagging another 50 basis points rise in October, followed by two 25 point rises in November and December.
"In his speech today RBA governor Lowe’s tone around inflation was hawkish but he foreshadowed smaller interest rate hikes in the near future," ANZ senior economist Adelaide Timbrell said.
"All else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises
"We acknowledge that there is a considerable risk that the RBA could slow its hiking to 25bp in October, in which case we would expect an additional 25bp hike early next year, leaving the terminal rate at 3.35%," Timbrell said.
Dr Lowe hinted at a slowdown when he spoke at the Anika Foundation lunch.
"We are conscious that there are lags in the operation of monetary policy and that interest rates have increased very quickly. And we recognise that all else equal, the case for a slower pace of increase in interest rates becomes stronger as the level of the cash rate rises," he said.
Of the criticism levelled at him regarding past comments about rates not rising until 2024, Dr Lowe denied he made that statement.
"I did not promise rates would not rise until 2024". It was in fact "highly conditional".
"Interest rates are higher, but you should be welcoming the stronger economy."
"The economy is so much better," he added.
Dr Lowe pointed to the variables that Australia must now navigate for a soft landing including high-energy costs, the prospect of low growth in the US and the Chinese government’s approach to managing COVID-19, which could complicate the RBA’s challenge.
“Some slowing in the global economy will help bring inflation down, but a sharp slowing would make the job of delivering a soft landing here in Australia much harder,” he said.
The RBA governor also reiterated that the benchmark 2 to 3% inflation target was an important anchor and remains the target over time as it gives the RBA flexibility to chase low inflation in a way that keeps unemployment low.
“In my view, flexible inflation targeting has served Australia well and remains the best monetary policy regime for Australia. It is certainly worth examining alternatives as part of the current Review of the RBA, but I do not see a strong case for a move away from this broad approach,” he said.
He did concede the RBA was taken by surprise at “considerably above target” price growth.
“A year ago, the RBA was forecasting that inflation over 2022 would be just 1¾ per cent. Now, we are expecting CPI inflation this year to be around 7¾ per cent. This is a very big change and a very large forecast miss,” he said.
One that was missed by private sector as well.
“Forecast misses of this scale should lead to soul-searching by forecasters and they certainly have at the RBA. It is important that we learn from this and improve our understanding of the inflation process.”
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