RBA’s supersized hike spooks ASX, closes 0.4% lower

Australian banks started to claw back its losses but not enough to see the glimmer of green after the surprise 25 basis point hike to 0.35 per cent versus the expected 15 basis points that market participants were expecting from the RBA. The lift in the interest rate got traders feeling optimistic about the big bank’s outlook on their net interest margins, the revenue they make from lending money.

At the closing bell, the S&P/ASX 200 was 0.4 per cent or 31 points lower at 7,316 with 127 of 200 shares in negative territory, while 66 rose.

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Macquarie Group (ASX:MQG) and Westpac (ASX:WBC) both added 0.1 per cent to $203.43 and $23.90 respectively with Commonwealth Bank (ASX:CBA) and NAB (ASX:NAB) both losing 0.7 per cent each while ANZ (ASX:ANZ) closed 0.2 per cent lower to $27.26.

Weighing on the index was Fortescue Metals Group (ASX:FMG) tumbling 4.8 per cent to $20.61, leading the losses in the iron ore mining circle joined by a steep decline from Costa Group Holdings (ASX:CGC), down 6.4 per cent to $3.06.

Technology stocks cushioned the blow, taking a strong lead from Wall St with Xero (ASX:XRO) added 2 per cent to $91.83, Appen (ASX:APN) jumped 4.6 per cent to $6.65 while Altium (ASX:ALU) closed 1.1 per cent higher to $31.77. Meanwhile, Block (ASX:SQ2) surged by 4.6 per cent to $148.47, while Zip Co (ASX:ZIP) added 5 per cent to $1.15 and Splitit (ASX:SPT) soared 10 per cent to 27.5 cents.

It will be interesting to see what next week’s consumer sentiment will be like after the latest survey showed a 5.8 point fall in the index to 90.7, the lowest since Victoria’s second Covid wave in August 2020 and the biggest weekly drop since early January during the height of the Omicron wave. Amid concerns over inflation and rate hikes, the proportion of respondents pessimistic about their financial outlook over the next year hit the highest since Apr 2020. Additionally, only 10 per cent of respondents now expect ‘good times’ for the economy over the next 12 months. With the interest rate outcome today, we could see this results take a clip as consumers fret over what it now actually means to their back pocket that the interest rate has officially moved higher.

Woolworths (ASX:WOW) added 0.4 per cent to $38.44, bucking the overall trend of the market as investors shrugged off “a very challenging quarter”. The supermarket giant’s quarterly update was mixed with its Aussie operations outperforming its New Zealand counterpart. Analysts said that the kiwi’s outcome was likely a one-off while Big W’s performance was a beat against expectations by a fraction.

Super Retail Group’s (ASX:SUL) year to date trading update also showed a mixed bag among its retail brands. UBS said that its net result led to a 6 per cent increase in the broker’s financial year 2022 forecast earnings. The supply chain strain has been a burden to many retailers with several companies buying excess inventory and Super Retail was one of them which has paid off as some Rebel Sports stores were impacted by “global supply chain disruptions”.

Despite the significant changes in efficiencies and customer experience being offset by covid-19 impacts, the changes are set to bode well for the future. Despite the near term forecast increase, UBS retained its buy rating and trimmed its price target to $13.00 from $14.00 on a sum of the parts valuation. Shares fell by 2 per cent to $10.24.

Several companies slipped after updating their guidance at the Macquarie Australia Conference.

Cleanaway (ASX:CWY) has tumbled 3.2 per cent to $3.05 after warning that lagging cost recoveries and one–off operational disruptions is set to dent the company’s financial year 2022 EBITDA by around $15 million to $20 million

Inghams (ASX:ING) fell 4.3 per cent to $2.87 after saying that its recovery has been impacted by ongoing effects of the Omicron outbreak, natural disasters and higher feed costs.

Bapcor’s (ASX:BAP) share price dived 4.9 per cent lower to $6.40 even as its financial year 2022 year to date performance through to 31 March has also been strong given the circumstances in the first half. Fundamental drivers of the automotive aftermarket remain strong and are expected to continue to do so with the company, continuing to aim to deliver pro forma earnings at least at the level of financial year 2021.

Breville Group (ASX:BRG) affirmed its guidance for this financial year, with EBIT to be “consistent with the markets’ consensus forecast of around $156 million. Shares declined 1.8 per cent to $22.91.

Investors now turn to Wall St for the Federal Reserve’s two-day meeting with economists expecting a 50 basis point hike to be unveiled but a handful see a 75 basis point hike, along with hikes in June and July to combat inflation. However, the rhetoric is around how aggressive the Fed could be and if its lift off cycle will send the US economy into a recession. Like the Aussie dollar, the greenback could be on the rise if a super sized rate hike is plated on Thursday.

We will wait and see.

Futures

The Dow Jones futures are pointing to a rise of 73 points.
The S&P 500 futures are pointing to a rise of 13 points.
The Nasdaq futures are pointing to a rise of 48 points.
The SPI futures are pointing to a fall of 28 points when the market next opens.

Best and worst performers

The best-performing sector was Information Technology, up 0.9 per cent. The worst-performing sector was Real Estate Investment Trusts, down 1.4 per cent.

The best-performing stock in the S&P/ASX 200 was Magellan Financial Group (ASX:MFG), closing 5 per cent higher at $17.11. It was followed by shares in Zip Co (ASX:ZIP) and Appen (ASX:APX).

The worst-performing stock in the S&P/ASX 200 was Costa Group Holdings (ASX:CGC), closing 6.4 per cent lower at $3.06. It was followed by shares in Premier Investments (ASX:PMV) and Imugene (ASX:IMU).

Asian markets

Japan’s Nikkei is closed due to Constitution Memorial Day.
Hong Kong’s Hang Seng has gained 0.14 per cent.
China’s Shanghai Composite is closed due to Labor Day.

Commodities and the dollar

Gold is trading at US$1860.42 an ounce.
Light crude is trading $0.10 lower at US$105.07 a barrel.
One Australian dollar is buying 71.15 US cents.