ASX 200 dropped 111 points to 7096 (-1.5%) after the RBA unexpectedly raised rates by 50bps. The market was already shaking on US futures losses as banks fell hard but the momentum picked up after 2.30 pm. The Big Bank Basket fell to $179.92 (2.5%). CBA off 2.6% and NAB down 3.3%. MQG slumped 3.0% with ASX down 3.2% as volumes continue to be low and deals are being pulled. Insurers slipped slightly. MFG rallied slightly after the drubbing yesterday up 2.1%. REITs fell hard as rates rose and 10-year yields rallied hard above 3.5%. GMG down 3.7% on consumer sentiment, SCG down 2.5% and SGP suffering a 3.6% fall. Healthcare was not spared either with CSL under pressure down 1.2% and RHC off 1.3% with FPH down 2.9%. Industrials slid and accelerated after the RBA move, WES down 3.9%, COL off 1.5% and TCL down 3.0%. ‘Old Skool’ platform stocks fell hard too, REA down 4.2% SEK off 3.2% and CAR down 3.0%. Tech stocks falling hard with WTC off 5.3%, XRO down 5.0% and the All–Tech Index off 2.8%. BNPL stocks under pressure as Apple joins the BNPL game. ZIP comes undone by 14.3%, SZL off 5.2% and SPT down 12.0%. Resources tried valiantly to hold the line but big miners succumbed with BHP down 0.1%, FMG off 1.1% and gold miners off a little, NCM down 1.5%. Lithium stocks were relatively firm, PLS unchanged, CXO up 3.8%, AKE up 1.0%. Energy stocks drifted lower with STO down 1.2% and WHC off 0.6%. In corporate news, YAL up 4.2% as it updated the market on the potential takeover bid, PRN rose 10.1% on a promising update and buyback announcement. SXE also rose 11.2% on a business update. In economic news, it was all about the RBA as it raised rates by 0.5%. Big surprise and AUD heads higher. Brefly. Consumer confidence fell 4.1% to 87. Japan up 0.1% China down 0.1% and HK down 0.5%.

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End of Day Podcast – Tuesday, June 7

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HEADLINES

• Winners: YAL, RIC, LKE, CXO, SFR, ING, ALD, VEA, MFG
• Losers: ZIP, TPW, TER, ARU, CXL, LFS, CUV, OFX
• Positive sectors: Lithium. Base metals.
• Negative sectors: Everything else.

• High 7209 Low 7082
• RBA lifts rates 0.5% – AUD surges briefly – Equities fall hard.
• Big Bank Basket: Dives to $179.92(2.5%)
• All-Tech index: Drops 2.8%
• Gold: Slips to $2568.
• Bitcoin: Back to US$29493
• Aussie Dollar: Slips to 71.74c after spoke above 72c.
• 10-Year Yield:Pushed higher to 3.55%
• Asian markets: Japan up 0.41% China down 0.1% and HK down 0.72%.
• US Futures: Dow down 174 Nasdaq down 96

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MAJOR MOVERS

• CXO +3.77% charging back.
• LKE +3.90% on shopping lists
• YAL +4.24% update on Yankuang Energy transaction.
• STX – conference presentation.
• ING +3.20% Luv ‘em.
• PRN +10.07% Strategy and buy back update.
• SXE +11.21% market update.
• STA +7.35% corporate presentation.
• ZNC – further high grades at Develin Creek.
• ZIP-14.38% SPT -12.00% SZL -5.15% comes undone on Apple Pay Later
• TER -8.70% change in substantial holding.
• MP1 -5.56% broker downgrade.
• CTT -9.71% slipping lower on consumer sentiment.
• Speculative Stock of the Day: Not huge volumes but Rocketboots (ROC) +107.32% on an announcement that it had been accepted to the Nvidia Metropolis Partner Program.

IN THE NEWS

• Perenti Global (PRN) launches on-market share buyback of up to 10% of shares on issue. SeesFY23 free cash stronger than FY22.
• Yancoal (YAL) appointed IBC concludes Yankuang Energy’s bid is not in the best interest of minority holders.
• Southern Cross Electrical Engineering (SXE) increases FY revenue guidance to $550m vs prior guidance $500m.

ECONOMIC NEWS/ BOND MARKETS

RBA Raises rates 50bps to 0.85%. Full statement here. Inflation was mentioned 13 times.

• Inflation in Australia has increased significantly. While inflation is lower than in most other advanced economies, it is higher than earlier expected. Global factors, including COVID-related disruptions to supply chains and the war in Ukraine, account for much of this increase in inflation. But domestic factors are playing a role too, with capacity constraints in some sectors and the tight labour market contributing to the upward pressure on prices. The floods earlier this year have also affected some prices.
• Inflation is expected to increase further, but then decline back towards the 2–3 per cent range next year. Higher prices for electricity and gas and recent increases in petrol prices mean that, in the near term, inflation is likely to be higher than was expected a month ago.
• The labour market is also strong. Employment has grown significantly, and the unemployment rate is 3.9 per cent, which is the lowest rate in almost 50 years. Job vacancies and job ads are at high levels and a further decline in unemployment and underemployment is expected.
• The Board expects to take further steps in the process of normalising monetary conditions in Australia over the months ahead. The size and timing of future interest rate increases will be guided by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board is committed to doing what is necessary to ensure that inflation in Australia returns to target over time.

ANZ Roy Morgan weekly consumer confidence fell 4.1% to 87, the lowest level since mid-August 2020. A reading of 100 is considered neutral. Inflation expectations rose to 5.7%, the highest reading since early April.

ASIAN MARKETS

• Yen slides to a twenty-year low. Worst performer in G-10 this year. Input and energy costs rising rapidly. Bank of Japan is now the only central bank among developed nations which isn’t tightening monetary policy.
• The Hang Seng Tech Index rallied to a two-month high on Monday. The Hang Seng Tech Index is trading at about 25 times its forward 12-month earnings, which is 25% below its historical average

US AND EUROPEAN HEADLINES

• Boris clings to power. Just. Few viable alternatives.
• European futures pointing to losses around 0.7%
• German April Industrials orders down 2.7% M/M v 0.3% up forecast.
• SEC chair to set out overhaul of US equity market.
• US gives solar projects reprieve by suspending SE Asian import tariffs.
• Supply chain issues are easing.

And finally…………

The Phone Call
A politician was visiting a remote little rural town in his constituency and asked the locals what the government could do for them.
“We have two big needs in this town,” said the mayor. “First, we have a hospital but no doctor.”
Quick as a flash the politician whipped out his mobile phone, punched in a number and spoke for a while, and then said, “I have just sorted that out.”
Then asked “What is your other need?”
The mayor replied, “We still don’t have any mobile phone reception in our town…”

Clarence

XXX