Mining giants put a lid on losses, RBA won’t sell bonds: ASX closes 0.1% higher

The Aussie sharemarket lost steam from midday and eked out a gain after hearing that Beijing reported a record number of Covid-19 cases, renewing concerns the capital may face another lockdown.

At the closing bell, the S&P/ASX 200 was 0.1 per cent or 3 points higher at 7,149.

Beijing reported a spike of 99 cases on Sunday, a new record, causing concerns about what would happen if they move down the path of what happened in Shanghai. China’s zero covid policy has choked the country’s economic growth as it struggles to achieve its 5.5 per cent annual growth target.

The index fluctuated through gains and losses as investors comb through earnings while digesting the speech from the RBA assistant governor Christopher Kent.

The RBA official said that reduction of the central bank’s balance sheet will be gradual over this year and next, before becoming more sizable from 2024. He repeated that the RBA has no plans to sell its bonds, reiterating a prior message, allowing bonds to roll off as it would contribute to bond market volatility.

Over time as the bonds mature, the RBA anticipates the contribution of its bond holdings to lower yields and the diminishing of Australian dollar, however, Mr Kent expects the effects will be predictable and modest.

This was enough to turn the sectors mixed, however the same winners continued to pull the index higher from the seven losers.

Materials led by 0.8 per cent, followed by information tech, up 0.4 per cent, then energy, and industrials. Utilities was the laggard, down 0.9 per cent, followed by financials, and consumer staples both fell 0.4 per cent each. Consumer discretionary shed the least by 0.1 per cent.

The rally in the iron ore miners comes after a weekly gain in the iron ore price, following China cutting its benchmark reference rate for mortgages for the second time, bolstering hopes for economic support.

Fortescue Metals (ASX:FMG) led the iron ore miners, up 2.8 per cent to $20.71, followed by BHP (ASX:BHP) added 1.4 per cent at $47.83, then Rio Tinto (ASX:RIO) by 1.1 per cent at $109.50.

National Australia Bank (ASX:NAB) led major banks lower, down 0.9 per cent to $30.78 while Commonwealth Bank (ASX:CBA) shed the least, by 0.1 per cent at $104.50.

Winners and losers

The best performers are Codan (ASX:CDA), Imugene (ASX:IMU), and Elders (ASX:ELD).

Codan (ASX:CDA) still expects record financial year 22 profit despite warning that the timing of project sales or challenges in supply chains could still impact revenues and profitability towards the end of the financial year. Shares closed 14.5 per cent higher at $7.73.

Elders (ASX:ELD) upgraded its financial year 22 guidance following a strong performance in all product areas and geographies during the six months to March 31. Shares closed 9 per cent higher at $14.94.

Imugene (ASX:IMU) closed 12.5 per cent higher at $0.22, following a letter to shareholders reassuring them that the company remains in a strong position despite its recent share price decline.

The worst performers were PolyNovo (ASX:PNV), Novonix (ASX:NVX), and Incitec Pivot (ASX:IPL).

Incitec Pivot’s (ASX:IPL first half EBIT soared 416 per cent on an annualised basis to $568 million but came in weaker than analysts expected. Jefferies cited that “it looks like this is mostly related to low realised ammonia prices in the 2Q, but the explosives result also looks a little underwhelming”. While Citi said that its first half growth was not as strong as expected as favourable urea pricing improved earnings by US$36 million compared to the prior corresponding period. Other than the disappointing miss, investors also found out that Incitec plans to split its Fertiliser and Dyno Nobel businesses into two separate listed companies to occur in the first half of 2023 after spending $3.3 billion in 2008 to buy Dyno Nobel.

What’s ahead?

Investors now turn to more speeches by central bank officials. Atlanta Fed President Raphael Bostic, Kansas City Fed President Esther George are set to speak. ECB governing council members Robert Holzmann and Joachim Nagel, Bank of England governor Andrew Bailey is slated to talk about inflation. Market participants will be looking for colour on the size and scope on the central bank’s view on its interest rate hiking cycle, and reduction of its balance sheet. Investors have already priced in two 50 basis point hikes in the US, however, any hawkish tone could be enough to see the bond market react. All this ahead of the US core price consumer expenditure price index, the Fed’s favourite inflation gauge as traders determine if the sell-off has more room to run.

Local economic news

Following increases in January and February this year, household spending rose again in March by 6.6 per cent compared to a year ago, according to the Australian Bureau of Statistics.

Through the year, household spending increased the most for recreation and culture, up 17.8 per cent, clothing and footwear, up 15.2 per cent, and transport, up 12.5 per cent.

Victoria and Queensland were both up 8.5 per cent, and were the states with the highest increase in household spending through the year.

Company news by Lauren Evans

Antipa Minerals (ASX:AZY) said Newcrest Mining will operate the next stage of the farm-in agreement relating to the Wilki project in Western Australia. Shares in Antipa Minerals closed 4.7 per cent higher at $0.045.

Anson Resources (ASX:ASN) announced that its drilling program at the Long Canyon No. 2 Well has reached the target depth at the top of the Mississippian units. Shares closed 4.4 per cent higher at $0.12.

Strike Energy (ASX:STX) provided an update on its South Erregulla gas discovery. The company has mobilised the testing package and is being rigged up at the SE-1 well site with flow testing expected to start within 72 hours. Shares closed 1.6 per cent higher at $0.31.

BetMakers’ (ASX:BET) subsidiary Racing Technology Ireland has been contracted as the new tote technology and services provider for Norway under a 10-year agreement. Shares closed 1.9 per cent higher at $0.52.

ANZ Bank (ASX:ANZ) announced that Jeff Smith will join the bank’s board on August 1 as a non-executive director. Shares closed 0.9 per lower at $25.26.

Transurban (ASX:TCL) announced that M5 West successfully raised $345 million of non-recourse debt via a new bank debt facility with a tenor to June 2025. Shares closed 0.6 per cent higher at $14.40.

Futures

The Dow Jones futures are pointing to a rise of 263 points.
The S&P 500 futures are pointing to a rise of 42 points.
The Nasdaq futures are pointing to a rise of 154 points.
The SPI futures are pointing to a rise of 3 points when the market next opens.

Best and worst performers

The best-performing sector was Materials, up 0.8 per cent. The worst-performing sector was Utilities, down 0.9 per cent.

The best-performing stock in the S&P/ASX 200 was Codan (ASX:CDA), closing 14.5 per cent higher at $7.73. It was followed by shares in Imugene (ASX:IMU) and Elders (ASX:ELD).

The worst-performing stock in the S&P/ASX 200 was PolyNovo (ASX:PNV), closing 7.6 per cent lower at $1.23. It was followed by shares in Novonix (ASX:NVX) and Incitec Pivot (ASX:IPL).

Asian markets

Japan’s Nikkei has gained 1.1 per cent.
Hong Kong’s Hang Seng has lost 1.1 per cent.
China’s Shanghai Composite has gained 0.1 per cent.

Commodities and the dollar

Gold is trading at US$1854.45 an ounce.
Iron ore is 5.3 per cent higher at US$136.25 a ton.
Iron ore futures are pointing to a rise of 3.3 per cent.
Light crude is trading $1.02 higher at US$111.30 a barrel.
One Australian dollar is buying 71.08 US cents.

Sources: Bloomberg, FactSet, Trading Economics, ABS