The ASX is set to dip this morning, despite yesterday’s 0.25% rate cut. ASX 200 futures are down 2 points (-0.02%) as of 8:30 am AEDT.
The Financial sector of the ASX 200 declined for the fourth consecutive session after reaching a record high last Thursday.
Westpac extended its losses following a weak trading update, falling 2.97% to $32.31. National Australia Bank (NAB) dropped 2.5% to $39.51, while Australia and New Zealand Banking Group (ANZ) slipped 1.77% to $30.61. Commonwealth Bank of Australia (CBA) also edged lower, down 1.44% to $162.60.
Meanwhile, BHP (ASX:BHP) gained 0.42% to $40.97 after reporting earnings that were largely in line with expectations. The company’s half-year revenue declined 8% to US$25.2 billion, reflecting weaker iron ore prices, while underlying attributable profit fell 23% to US$5.1 billion. BHP also cut its interim dividend by 30.5% to US$0.50 per share.
Next (LON:NXT) in Australia, the Wage Price Index (WPI) is set for release, alongside earnings reports from Eagers Automotive, Goodman Group, James Hardie, NAB, Rio Tinto (ASX:RIO), Santos and Stockland. The Reserve Bank of New Zealand will also deliver its policy decision.
Speaking of rate cuts, there was plenty of commentary yesterday.
Navleen Prasad, CEO of the Australian Investment Council, the peak body for private equity, venture capital and private credit in Australia, said, “Private capital markets welcome the RBA’s rates decision today and its cautious assessment that underlying inflation is moderating.
“There is considerable capital sitting on the sidelines waiting to be deployed. Today’s decision will help boost confidence and investment activity required for a more productive economy.”
Harry Murphy Cruise, head of China and Australia Economics at Moody’s Analytics, noted: “While the move was widely expected, it wasn’t a clear-cut decision.
"On inflation alone, there was very good reason to start cutting rates. But the tight labour market and a flurry of spending at the end of 2024 meant there was no need for the RBA to rush.
"On top of that, heightened global uncertainty and China’s struggling economy could be headwinds to growth later this year; keeping some rate cuts in the bank would be helpful to spur demand if that occurs. Moreover, imminent pre-election spending promises could signal bad news for inflation.
“Given all those notches in the column to hold rates steady, the board’s accompanying statement was about as hawkish as possible while still announcing a cut. Risks that inflation could move higher dominated the near-800-word statement. In turn, the board made clear it was ’cautious about the outlook’.
"Reading between the lines, don’t expect more easing any time soon. Indeed, the statement noted, ’if monetary policy is eased too much too soon, disinflation could stall and inflation would settle above the midpoint of the target range.’ We don’t expect another cut until July.
“Given recent progress, underlying inflation is now forecast to end the year at 2.7%, down from the November forecast of 2.8%. But those dynamics do a switcheroo next year, with the forecast revised up to 2.7% from 2.5%.
"That upward revision through 2026 is yet another reason for the RBA’s aversion to cut rates too quickly. For what it’s worth, we forecast underlying inflation to end this year at 2.6% and stay there through 2026.”
US share markets edge higher
US share markets edged higher on Tuesday as investors showed little conviction in a holiday-shortened week, with earnings season winding down and geopolitical and trade uncertainties tempering risk appetite.
The major indices were weighed down by declines in Meta Platforms, Amazon.com (NASDAQ:AMZN) and Alphabet (NASDAQ:GOOGL), which fell between 0.8% and 2.8%.
Intel (NASDAQ:INTC) surged 16.1% following reports that Taiwan Semiconductor Manufacturing Company and Broadcom (NASDAQ:AVGO) were each considering potential deals that could split the chipmaker.
Super Micro Computer jumped 16.5% on a bullish outlook while Walgreens Boots Alliance (NASDAQ:WBA) gained 13.9% after CNBC reported Sycamore Partners’ buyout interest remained active. However, Medtronic (NYSE:MDT) slipped 7.3% after reporting mixed results and a 4.4% drop in UnitedHealth (NYSE:UNH) weighed on the Dow Jones index, which added just 10 points.
“Comments overnight from Federal Reserve officials, including Philadelphia Fed President Patrick Harker and Governors Michelle Bowman and Christopher Waller, suggested that economic strength and stubborn inflation will likely see rates stay on hold until progress is made toward the Fed’s 2% inflation target,” IG Markets analyst Tony Sycamore said.
“Looking ahead, the focus shifts to the minutes from January FOMC meeting to be released at 6 a.m. AEDT tomorrow. They will be scanned for more details about the FOMC’s views of appropriate policy settings and any clues of policy guidance going forward. Ahead of the minutes release the US rates market is fully priced for a 25bp Fed rate cut in September.”
- The S&P 500 rose 0.2% to a record close.
- The Nasdaq index gained 14 points or 0.1%.
European markets
European sharemarkets closed at record highs, with banking and defence stocks among the strongest performers as investors factored in the prospect of increased military spending amid peace talks to end the Russia-Ukraine conflict. Defence stocks gained 0.8%, with Leonardo rising 2.1%, Sweden’s Saab AB adding 0.6%, and France’s Thales (EPA:TCFP) up 2.3%.
Rising eurozone bond yields helped push banks up 1.8%, leading sectoral gains, while utilities—often seen as bond proxies—declined 0.5%.
- The FTSEurofirst 300 index gained 0.4%.
- UK’s FTSE 100 ended flat.
Currency, commodity and metals markets
Currencies
Currencies were mixed against the US dollar in European and US trade.
- The euro fell from US$1.0468 to US$1.0434 before stabilising near US$1.0450 at the close.
- The Australian dollar dipped from US$0.6362 to US$0.6339, ending near US$0.6350.
- The Japanese yen firmed from JPY152.21 per US dollar to JPY151.52, closing near JPY152.05.
Commodities
Global oil prices rose as expectations that OPEC and its allies may delay production increases outweighed hopes of a resolution to the war in Ukraine.
- Brent crude climbed US$0.62 or 0.8% to US$75.84 per barrel.
- US Nymex crude gained US$1.11 or 1.6% to US$71.85 per barrel.
Metals
Base metal prices were mixed. Copper futures declined 1.5% amid US tariff concerns and a stronger dollar, while aluminium futures added 0.1%.
- Gold futures rose by US$48.30 or 1.7% to US$2,949.00 per ounce as uncertainty over US trade policy supported safe-haven demand. Spot gold traded near US$2,934 at the close.
- Iron ore futures eased US$0.09 or 0.1% to US$106.74 per tonne as traders shifted focus back to Chinese demand after Tropical Cyclone Zelia left Australia’s key export ports unscathed.
What about small caps?
The S&P/ASX Small Ordinaries fell 0.24% yesterday to 3,246.50. Over the past five days, the index is trading 0.82% higher.
It is a slow news day today but you can read about the following and more through the day.