Hawkish RBA sends ASX higher for 3rd day, closes 0.6%

Signals of hawkiness continue to grow after the RBA minutes flagged that the central bank could bring forward its interest rate timeline, pushing the local bourse higher for a third day, closing 0.6 per cent higher to 7,565, its highest close since 5 January. The index is up 1.2 per cent in the past 5 days and advanced 6.6 per cent in the past 30 days.

Eight out of the 11 sectors closed higher led by energy, materials, and financials with the nation’s largest stock on the local bourse, BHP (ASX:BHP) adding 1.3 per cent to $53.17 while Imugene (ASX:IMU) took home the best performer title, rallying 9.3 per cent.

The Reserve Bank of Australia said that a pickup in wages growth and inflation has moved up the likely timing of the nation’s first interest-rate hike since 2010.

The central bank said in minutes of its April policy meeting that annual core inflation in the first three months of this year was likely to be above the top of its 2 to 3 per cent target with policy makers also noting that wages growth has improved.

“These developments have brought forward the likely timing of the first increase in interest rates,” said the RBA. “Over coming months, important additional evidence will be available on both inflation and the evolution of labour costs.”

The Aussie dollar moved higher and the three-year government bond yields climbed as the minutes reinforced the RBA’s hawkish stance after scrapping its “patient” approach on policy, signalling inflation readings on April 27 and wages data on May 18 are key data points.

The shift reflects a hawkish turn among global central banks in a fight to combat high consumer prices fueled by pandemic-stimulus which is now compounded by Russia’s war in Ukraine.

“An updated set of bank forecasts will be published in May,” the RBA said in the minutes. “The speed of the resolution of the various global supply-side issues, developments in global energy markets and the evolution of overall labour costs were key sources of uncertainty about the inflation outlook.”

Banks rallied in the wake of this with National Australia Bank (ASX:NAB), Westpac Banking Corporation (ASX:WBC), and ANZ Banking Group (ASX:ANZ) all advancing 1.2 per cent each. Macquarie Group (ASX:MQG) added 0.9 per cent at $205.55 with Commonwealth Bank of Australia (ASX:CBA) closing 0.5 per cent higher at $107.01.

Bank of Queensland (ASX:BOQ) fell 0.6 to $7.94 amid several brokers trimming its target price on the regional lender following last week’s first-half financial year 2022 result. While the bank’s first half pre-provision profit was in-line with Morgan Stanley’s forecast, it included around $20 million of one-offs which boosted pre-provision profit by around 6 per cent with net interest income coming in at a miss, cutting its target price to $9.80 from $10.20. Even though the broker was disappointed by the results, Morgan Stanley maintains its outperform rating on an improving franchise performance amid margin and cost headwinds easing.

Investment platform provider HUB24 (ASX:HUB) rose 2 per cent to $25.96 after net inflows grew 36.4 per cent along with a 33 per cent jump in its total funds under administration as the provider celebrated a 24.4 per cent growth in advisers using their platform. Its market share grew from 2.5 per cent to 4.9 per cent with its recent Class acquisition performing “in line with expectations”.

While rival Praemium’s (ASX:PPS) 82 per cent jump in its March quarterly net inflows of $725 million saw the share price surge 15 per cent to 73 cents. The platform provider has been on a roll since posting its record funds under administration of $49 billion in February with its Aussie arm taking home gold, contributing 63 per cent of flows of $446 million with the remaining $279 million derived internationally when compared to the prior corresponding period. Financial year to date net inflows also catapulted 112 per cent from $1.7 billion in March 2021 to $3.6 billion with total funds under administration of $47.7 billion, rising 26 per cent from $37.9 billion last year. The move comes after the platform provider inked a $65 million deal with Morningstar to sell its operations in United Kingdom, Jersey, Hong Kong and Dubai in December last year which is set to settle by the third quarter this year after Anthony Wamsteker was appointed chief executive officer in August 2021.

Meanwhile, Cleanaway Waste Management (ASX:CWY) was the second best winner on the local bourse, notching its best performance since April last year amid news that KKR has been preparing an offer for the waste management company, according to the AFR.

Elsewhere, the Japanese yen is on its longest-losing streak in at least half a century as it falls for its 13th day against the greenback after the Federal Reserve Bank of St. Louis President James Bullard said U.S. interest rate increases of 75 basis points are an option.

Futures

The Dow Jones futures are pointing to a rise of 71 points.
The S&P 500 futures are pointing to a rise of 13 points.
The Nasdaq futures are pointing to a rise of 67 points.
The SPI futures are pointing to a rise of 33 points when the market next opens.

Asian markets

Japan’s Nikkei has gained 0.8 per cent.
Hong Kong’s Hang Seng has lost 2.5 per cent.
China’s Shanghai Composite has lost 0.4 per cent.

Company news

The Biden administration has granted a conditionally backed loan to Syrah Resources (ASX:SYR) to the value of $145 million (US$107 million) to expand its Vidalia processing facility for electric vehicle battery components in Louisiana. Once approved, Syrah aims to accelerate its growth strategy in its downstream business and support the rapidly growing EV and battery supply chain in the USA. Meanwhile as the graphite miner continues to suffer shipping constraints at Nacala, shipments through Pemba could provide some reprieve. Credit Suisse notes that the company has loaded its first shipment via Pemba and confirmed plans for further shipments through 2022. The broker further also said that following the Nacala recovery, the addition of Pemba could see an additional 210,000 tonnes in shipments this year. While near-term cash burn is estimated at US$15 million a month, the broker notes that the $250 million equity raising provides a buffer. Credit Suisse has stamped the company with a neutral rating with a price target of $1.65. Shares closed 14.3 per cent higher to $1.79.

AMP (ASX:AMP) has confirmed that it is in talks with “multiple parties” about the future of Collimate Capital, previously known as AMP Capital, in order to simplify operations and focus on local wealth management, super and banking solutions. The embattled wealth manager has confirmed that negotiations with property group Dexus and other interested parties could result in a transaction to sell AMP’s real estate and infrastructure business. The private markets business, rebranded to Collimate Capital, comprises over $44 billion in real estate and infrastructure investments offshore and posted $325 million of impairment charges in February. Chief executive officer Alexis George said the impairments were recorded in line with “the future strategic direction” of the company and that “the charges are mainly non-cash and related to legacy issues, and our action will ensure that both businesses are in a stronger position to take advantage of opportunities in the future”. Investors also woke up to an announcement from Dexus (ASX:DXS), who confirmed that it was talking to AMP about a possible transaction after media speculation, noting that there was no certainty that a deal would be inked. If the latest move sees Collimate Capital change course from AMP’s initial plan to demerge and separately list on the ASX to a partial or a full sale, it could spark a new chapter after Perpetual (ASX:PPT) put a $2.4 billion bid for Pendal (ASX:PDL) this month. Shares closed 0.9 per cent higher to $1.07.

Broker moves

Credit Suisse rates Netwealth (ASX:NWL) as an outperform and drops the price target to $16.75 from $17.00. The third quarter inflows of $2.6 billion missed the broker’s $3.0 billion estimates attributed by labour shortages during the period. Credit Suisse cites that flows remain strong at around 20 per cent per annum.The company has reiterated full year flow guidance of more than $13.5 billion, implying fourth quarter inflows of at least $3.2 billion. Shares closed 0.3 per cent lower to $13.16.

UBS rates QBE (ASX:QBE) as a buy and raised its target price to $15 from $14.40. The insurance group remains the broker’s favourite after citing that the company continues to enjoy a number of macro, micro and industry tailwinds. The broker says that it’s driving return on equity back to 14 per cent levels and believes the market appears to be underestimating the financial boost provided by ongoing repricing and rebounding bond yields. Shares closed 3.1 per cent higher to $12.26.

Ord Minnett rates Transurban (ASX:TCL) as a buy with a reduced price target at $15.00 from $15.40. The broker cites that its March quarter traffic update showed improving trends as the economy reopens with the data points indicating an acceleration into the June quarter. Ord observes a gradual increase in average workday and airport-exposed traffic when compared to its peak since March 2020. The broker feels that the recovery could have been stronger without the disruption from the adverse weather in New South Wales and Queensland. Ords has adjusted its earnings forecast for financial year 2022 to take this into account. Shares closed 0.6 per cent higher to $13.75.

Canaccord Genuity has downgraded IGO (ASX:IGO) to hold from buy, shares closed 0.9 per cent higher to $14.10 while the broker raised Nickel Mines (ASX:NIC) to buy from hold and closed 0.8 per cent higher to $1.26.

Goldman rated ReadyTech (ASX:RDY) as a new buy with a price target of $5. Shares closed 2.5 per cent higher to $3.25. Technology One (ASX:TNE) is also rated as a new buy with a price target of $13.90, shares closed 0.4 per cent higher to $10.96 while Wisetech (ASX:WTC) is rated as a new neutral with a price target of $53. Shares closed 1.4 per cent lower to $46.35.

Best and worst performers

The best-performing sector was Energy, up 1.3 per cent. The worst-performing sector was Health Care, down 0.7 per cent.

The best-performing stock in the S&P/ASX 200 was Imugene (ASX:IMU), closing 9.3 per cent higher at $0.24. It was followed by shares in Cleanaway Waste Management (ASX:CWY) and Beach Energy (ASX:BPT).

The worst-performing stock in the S&P/ASX 200 was City Chic Collective (ASX:CCX), closing 4.70 per cent lower at $2.84. It was followed by shares in Block (ASX:SQ2) and Paladin Energy (ASX:PDN).

Commodities and the dollar

Gold is trading at US$1976.05 an ounce.
Iron ore is 0.7 per cent higher at US$153.85 a ton.
Iron ore futures are pointing to a fall of 1.9 per cent.
Light crude is trading $0.34 lower at US$107.27 a barrel.
One Australian dollar is buying 73.80 US cents.