ASX 200 up a massive 242 points to 6699.3 (+3.8%) on rallying US markets and a surprise 25bps rise from the RBA. The market kicked higher after the less-than-expected rise, AUD fell, and 10-year yields tumbled to 3.72% Green across the screen with few exceptions. Financials fired higher with the Big Bank Basket up to $169.99 (+4.4%). MQG rallied 4.5%, insurers rose with QBE up 4.3%, and fund managers also joined in the fun. MFG up 5.2% and GQG up 7.3%. Healthcare blossomed, CSL up 1.5%, SHL up 2.9% and COH up 3.8%. Industrials fired, COL up 1.4%, EDV up 3.9% and TCL rallying 3.0%. REITs in demand on lower bond yields, GMG up 5.7% and SGP up 4.3%. Tech went nuts with the All-Tech Index up 4.8%, XRO up 6.3% and CPU up 2.9%. Resources also fired on all cylinders, BHP up 3.8%, RIO up 3.1% and base metals all good. IGO up 6.3%, PLS and other lithium stocks also doing well, PLS up 12.3%, LTR up 9.3% and CXO up 11.8%. Gold miners did well too as bullion rose and the AUD fell. NCM up 6.3% and NST up 7.4%. Oil and gas better on crude rises. Corporate news took a back seat today, SYA rose 13.3% as it launched its PFS for NAL. PAR soared 19.8% on good news on its Phase 2 trials and EMV up 16.8% on ethics permission. On the economic front, it was all about the RBA. 25bps and the falling yields and AUD. Meanwhile, in Asia, Japan kicked higher as the USD fell with the Topix up 3% and the Nikkei up 2.8%. China still closed. Dow Futures are up 228 points. 

Headlines

  • Winners: LKE, SYA, TLS, CMM, CXO, SLR, AGY
  • Losers: TER, TYR, IDX, MCY, PFP, PSI
  • Positive sectors: Everything. Banks especially. Gold. Lithium. Tech.
  • Negative sectors: Nothing.
  • RBA blinks with 25bps rise.
  • High 6699 Low 6487 Better volume.
  • Big Bank Basket: Closed at $169.99 (Up 4.4%)
  • All-Tech index: Up 4.8%
  • Gold: Big rally $2627
  • Bitcoin: Rallies to US$19,596
  • Aussie Dollar: Eases to 64.65c on RBA move.
  • 10-Year Yield: Tumbles to 3.72%
  • Asian markets: China closed for Golden Week. Japan up 3.1%. Topix up 3%
  • US Futures: Dow up 0.8% Nasdaq up 1.25%
  • European markets set to open significantly higher.

Major Movers

  • LKE +14.53% AGM
  • SYA +13.33% AGM and PFS.
  • CXO +11.79% bounces after cap raise.
  • PLS +12.31% lithium back.
  • SLX +10.00% uranium exposure.
  • AKE +9.94% Peter Coleman joins as chair.
  • GOR +8.76% SLR +10.78% DEG +6.86% gold miners up, up and away.
  • PAR +19.84% successful endpoint in phase 2 trial.
  • EMV +16.79% ethics approval for multi-centre trial.
  • NVA +12.90% high-grade gold intercepts.
  • LNK +4.11% update of an in-specie distribution. Trading halt late.
  • TER -3.85% final director’s interest.
  • KKC -0.27% NTA
  • TYR -2.59% final director’s interest.
  • ABY -8.13% thin volumes.
  • IPO of the Day LGI +14.00% company solves emission issues for landfill sites.
  • Speculative Stock of the Day: Eastern Resources (EFE) +33.33% thick pegmatites intercepted at Trigg Hill project. Good volume. Honourable mention to SXE up 0.8% on presentation.

In the News

  • Sayona Mining (SYA) – Launches a pre-feasibility study for the production of lithium carbonate at NAL operation, where production of spodumene concentrate is scheduled to commence from the first quarter of 2023.
  • Liontown Resources (LTR) – Yesterday the Western Australian government approved a 4Mtpa operation at the Kathleen Valley lithium project
  • Evolution Mining (EVN) – Secures long-term power supply agreement for Cowal under eight-year partnership with AGL Energy commencing Jan-23
  • Imugene (IMU) – Appoints Giovanni Selvaggi as Chief Medical Officer.
  • BigTinCan Holdings (BTH) – Confirms non-binding indicative proposal to acquire LiveTiles via a scheme of arrangement for $0.07/share in cash.
  • Mayne Pharma (MYX) – completed the $US475m ($722m) sale of its Metrics Contract Services drugs portfolio to Catalent Pharma Solutions.

Economic News/Bond Markets

  • RBA raises rates by only 25bps. Big jump in equities. AUD falls but then recovers a little. Yields tumble.

At its meeting today, the Board decided to increase the cash rate target by 25 basis points to 2.60 per cent. It also increased the interest rate on Exchange Settlement balances by 25 basis points to 2.50 per cent.

The Board is committed to returning inflation to the 2–3 per cent range over time. Today’s increase in interest rates will help achieve this goal and further increases are likely to be required over the period ahead. The cash rate has been increased substantially in a short period of time. Reflecting this, the Board decided to increase the cash rate by 25 basis points this month as it assesses the outlook for inflation and economic growth in Australia.

As is the case in most countries, inflation in Australia is too high. Global factors explain much of this high inflation, but strong domestic demand relative to the ability of the economy to meet that demand is also playing a role.

A further increase in inflation is expected over the months ahead, before inflation then declines back towards the 2–3 per cent range. The expected moderation in inflation next year reflects the ongoing resolution of global supply-side problems, recent declines in some commodity prices and the impact of rising interest rates. Medium-term inflation expectations remain well anchored, and it is important that this remains the case. The Bank’s central forecast is for CPI inflation to be around 7¾ per cent over 2022, a little above 4 per cent over 2023 and around 3 per cent over 2024.

The Australian economy is continuing to grow solidly and national income is being boosted by a record level of the terms of trade. The labour market is very tight and many firms are having difficulty hiring workers. The unemployment rate in August was 3.5 per cent, around the lowest rate in almost 50 years. Job vacancies and job ads are both at very high levels, suggesting a further decline in the unemployment rate over the months ahead. Beyond that, some increase in the unemployment rate is expected as economic growth slows.

Wages growth is continuing to pick up from the low rates of recent years, although it remains lower than in other advanced economies where inflation is higher. Given the tight labour market and the upstream price pressures, the Board will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms in the period ahead.

Price stability is a prerequisite for a strong economy and a sustained period of full employment. Given this, the Board’s priority is to return inflation to the 2–3 per cent range over time. It is seeking to do this while keeping the economy on an even keel. The path to achieving this balance is a narrow one and it is clouded in uncertainty.

One source of uncertainty is the outlook for the global economy, which has deteriorated recently. Another is how household spending in Australia responds to the tighter financial conditions. Higher inflation and higher interest rates are putting pressure on household budgets, with the full effects of higher interest rates yet to be felt in mortgage payments. Consumer confidence has also fallen and housing prices are declining after the earlier large increases. Working in the other direction, people are finding jobs, gaining more hours of work and receiving higher wages. Many households have also built up large financial buffers and the saving rate still remains higher than it was before the pandemic.

Today’s further increase in interest rates will help achieve a more sustainable balance of demand and supply in the Australian economy. This is necessary to bring inflation back down. The Board expects to increase interest rates further over the period ahead. It is closely monitoring the global economy, household spending and wage and price-setting behaviour. The size and timing of future interest rate increases will continue to be determined by the incoming data and the Board’s assessment of the outlook for inflation and the labour market. The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that.

  • Vanguard’s senior economist Alexis Gray said the RBA’s move is prudent given the risk of a policy overshoot.

Asian Markets

  • China and HK remain closed for Golden Week.
  • North Korea fired a missile over Japan for the first time in five years, further ratcheting up tensions.
  • Japanese stocks surged, with the benchmark Topix rising 3%, as weak US economic data fueled hope for slower Federal Reserve tightening. The Topix is down less than 5% this year, compared with slides of more than 20% in the S&P 500 Index and MSCI Asia Pacific Index.

US and European Headlines

  • Conservative party conference continues. New slogan MBGA. Make Boris Great Again.
  • Turkish inflation tops 83% as Erdogan promises more rate cuts.
  • Kim Kardashian to pay $1.3mn to settle crypto charges.
  • Google said it shut down the Google Translate service in mainland China, citing low usage.
  • Elon Musk told to get lost by the Ukrainian ambassador after tweet to canvas peace and concessions with Russia.
  • Manhattan apartment sales fell 18% in the third quarter, putting the brakes on New York’s real estate comeback.

And finally….

My wife Rose is leaving me because of my obsession with pens.

Bye Rose.

Is there a doctor in the house?!

Yes, I’m a doctor of mathematics. What’s the problem?

My friend has had a heart attack!

Minus one.

I was in a restaurant that advertised breakfast at any time. I ordered a poached egg during the Renaissance

Clarence

XXXX

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