Australian investors climb the wall of worries ahead of the interest rate outcome tomorrow from the Reserve Bank of Australia.
A looming federal election this month weighs on the central bankers tomorrow after the nation’s inflation climbed 5.1 per cent annually in March from 3.5 per cent the month prior. The closely watched figures by the RBA, the trimmed mean consumer price index rose by 3.7 per cent over the year, the fastest pace in 12 years, surpassing the midpoint of the central bank’s 2 to 3 per cent target after its 1.4 per cent bump over the March quarter.
Economists are throwing darts on how high the nation’s first interest rate hike will be since 2010 with the range, starting from 15 basis points to 40 basis points to combat inflation.
Aussie equities have taken a negative lead from Wall Street after another tech rout in the wake of disappointing earnings and surging bond yields, disintegrating the appeal of growth and long duration stocks. Exacerbating concerns is the current geopolitical pressure in Ukraine, the lockdown in China and the strained supply chain.
At noon, the S&P/ASX 200 is 1.6 per cent or 121 points lower at 7,315. The SPI futures are pointing to a fall of 111 points.
Tech rout leads broad-based tumble
Information tech shares are leading the declines by 4.3 per cent like the Nasdaq, followed by property, down 3.4 per cent, then healthcare by 2.4 per cent. On the lighter side of the shed, utilities and industrials are both down 0.4 per cent while energy stocks are down 0.9 per cent.
The biggest decliners are Commonwealth Bank (ASX:CBA) falling 1.1 per cent to $102.69, Xero (ASX:XRO) tumbling 6.7 per cent to $89.88, Wisetech (ASX:WTC) down 5.3 per cent to $42.86, and Reece (ASX:REH) trading 4.2 per cent lower to $6.77. However, there are some green amid this fall with the biggest advancers being Qantas (ASX:QAN), taking off 2.3 per cent to $5.73, Rio Tinto (ASX:RIO), up 0.1 per cent to $112.95, and Origin Energy (ASX:ORG) trading 0.3 per cent higher to $6.86.
However, the theme today is all about travel stocks.
Regional Express (ASX:REX) and American player Delta Air have connected at the tip to leverage each other’s networks. The move is set to see the small airline player rival with the flying kangaroo, Qantas (ASX:QAN). The partnership with Delta is set to give strong branding power to Rex’s new strategy with Qantas. Shares in Qantas, taking off 2.5 per cent to $5.74 while shares in Regional Express (ASX:REX) are trading 2.4 per cent higher to $1.26.
Rio bright, energy, gold under pressure
Fortescue Metals (ASX:FMG) has fallen 0.7 per cent to $21.48 and BHP Group (ASX:BHP) is down 0.6 per cent to $47.73, while Rio Tinto (ASX:RIO) is trading 0.1 per cent higher at $112.96.
Gold stocks are under pressure led by Northern Star (ASX:NST) down 2.3 per cent to $9.60 and Evolution Mining (ASX:EVN) down 2.2 per cent lower at $3.96.
Santos (ASX:STO) is down 0.6 per cent at $7.95, Woodside Petroleum (ASX:WPL) is down 0.4 per cent at $31.03 and Beach Energy (ASX:BPT) is trading flat at $1.63.
Local economic news
The residential property markets of Australia’s two largest cities have hit their first quarter of negative territory since the extended lockdowns of 2020. Sydney and Melbourne’s market slowdown has seen CoreLogic’s national Home Value Index continue to lose steam through April. Housing values are still rising at the national level, however the 0.6 per cent monthly rate of growth is the lowest reading since October 2020.
Sydney housing values recorded the third consecutive month-on-month decline, down 0.2 per cent, while Melbourne values were flat. Technically values are down over three of the past five months in Melbourne. Hobart also recorded a negative monthly change (-0.3 per cent), the city’s first monthly fall in 22 months.
The Australian Industry Group performance of manufacturing index increased to 58.5 in April of 2022 from 55.7 in the previous month, the highest since July 2021. “New orders increased further in April and, with many businesses feeling capacity constraints and difficulties in securing inputs and staff, the pressures on filling orders are set to continue in coming months,” Ai Group chief executive Innes Willox said.
ANZ job advertisements fell by 0.5 per cent in April.
Melbourne Institute Inflation gauge fell by 0.1 per cent in April but was still up 3.4 per cent on a year ago.
Here is Lauren with your top headlines
Qantas (ASX:QAN) said it’s seeing a sustained recovery in travel demand as Australia transitions to living with Covid-19. It said revenue growth during the third quarter has led to a rapid reduction in net debt of $1 billion to $4.5 billion by the end of April, below pre-Covid levels. This compares to a peak of more than $6.4 billion at the height of border closures. However, the company still expects to post a full year EBIT loss for FY22, that includes the worst of the Delta and Omicron impacts as well as one-off restart costs. Shares are trading 2.3 per cent to $5.73
Helloworld Travel (ASX:HLO) also said its post-Covid recovery continues as borders reopen and confidence returns as travellers book with longer lead times and a higher average spend. Its revenue during the March quarter rose by 52 per cent, while its EBITDA loss of $1.9 million improved by 53 per cent compared with the prior year period despite a $4.8 million reduction in government wage subsidies. Shares are trading 3.8 per cent higher at $2.76.
Regional Express (ASX:REX) and Delta Air Lines are set to provide interline ticketing and baggage services to each other, starting in the third quarter of 2022, after Rex Airlines signed a letter of intent with Delta. It said Rex’s passengers will be able to connect seamlessly on Delta’s daily flight between Sydney and Los Angeles, a frequency which will increase to 10 flights a week beginning in December. Shares are trading 2.4 per cent higher to $1.26.
AGL Energy (ASX:AGL) has downgraded its earnings guidance for the 2022 financial year following a review of the anticipated financial impact of the generator fault at the Loy Yang Power Station in Victoria, which is expected to cost around $73 million pre-tax. It expects underlying EBITDA to be between $1.23 to $1.3 billion, down from the previous guidance range of between $1.27 billion and $1.4 billion. It also expects underlying profit after tax to be between $220 and $270 million, down from the previous guidance range of between $260 million to $340 million. Shares are trading 0.6 per cent lower at $8.63.
Ahead of its March half year results release later this week, National Australia Bank (ASX:NAB) has entered into an enforceable undertaking with the financial intelligence agency AUSTRAC after an investigation confirmed flaws in the bank’s compliance with money laundering laws. Shares are trading 1.9 per cent lower to $32.02.
Telstra (ASX:TLS) has appointed Michael Ackland as its new chief financial officer and group executive of strategy & finance, starting from September 1. Michael is currently group executive for consumer & small business, and will take over from Vicki Brady when she starts in her new role as chief executive officer. The search to fill Michael’s current role has commenced. Shares are trading 1.4 per cent lower at $3.98.
Centuria Office REIT (ASX:COF) has reinforced its FY22 funds from operations guidance of 18.3 cents per unit, and its distribution guidance of $16.6 cents per share, representing a distribution yield of 7.5 per cent based on the current trading price. It said its portfolio occupancy has increased to 94.1 per cent, comprising modern office buildings leased on strong tenant covenants. Shares are trading 0.9 per cent lower at $2.18.
Liontown Resources (ASX:LTR) has completed negotiations withLG Energy Solutions, and executed its first offtake agreement for the supply of spodumene concentrate from its Kathleen Valley Lithium Project in WA. The agreement with South Korean-based LG is consistent with its announcement in January, which includes the supply of up to 150,000 dry metric tonnes per annum of spodumene concentrate expected to commence in 2024. Shares are trading 2.6 per cent lower at $1.43.
Crown Resorts (ASX:CWN) says it has held discussions with the Victorian government to clarify aspects of its proposal to increase the tax rate for electronic gaming machines at Crown’s Melbourne operation. Crown estimates that if the proposed arrangements were in place during FY19, prior to Covid-19, the impact on earnings would have been about $35 to $40 million while the actual impact on future earnings will depend on various matters including the revenue generated at Crown Melbourne. Shares are trading 0.2 per cent lower at $12.88.
Core Lithium (ASX:CXO) has executed its crushing services contract with CSI Mining Services for the Finniss Lithium Project near Darwin, Northern Territory. The crusher civil works are nearing completion with CSI expected to start mobilising to the project during June this year. Shares are trading 5.7 per cent lower at $1.32.
Best and worst performers
All sectors are in the red. The sector with the fewest losses is utilities, down 0.4 per cent. The worst-performing sector is information technology, down 4.3 per cent.
The best-performing stock in the S&P/ASX 200 is Qantas Airways (ASX:QAN), trading 2.3 per cent higher at $5.73. It is followed by shares in GrainCorp (ASX:GNC) and Flight Centre Travel Group (ASX:FLT).
The worst-performing stock in the S&P/ASX 200 is Pro Medicus (ASX:PME), trading 8.7 per cent lower at $43.37. It is followed by shares in Xero (ASX:XRO) and Goodman Group (ASX:GMG).
Commodities and the dollar
Gold is trading at US$1892.43 an ounce.
Iron ore is 0.2 per cent higher at US$142.35 a ton.
Iron ore futures are pointing to a rise of 4.2 per cent.
One Australian dollar is buying 70.56 US cents.