ASX 200 closed down 12 points to 7118 (-0.2%) in a subdued trading day as the market continues to digest yesterday’s surprise rate hike from the RBA and looks for clues in Lowe’s speech today for interest rate trajectory. Sectors closed mixed today. Banks and Energy sectors worst performers. The Big Bank Basket is down to $163.75 (1.0%), the big four all down, CBA -0.9%, NAB -1.8%, WBC -1.5%, and ANZ flat. Interest rate sensitive REITS fell, GMG down 0.7% and SCG off 0.7%. The tech sector ignored the rate hike, with the All-Tech Index up 0.6%, SQ2 up 4.7%, WTC up 1.0%, and CPU rose 1.1%. Inflation hedge gold in the green with EVN up 0.3% and NCM +0.7%. Healthcare performed well, rallying as much as 1% during afternoon trade, supported by record results from PNV. COH +1.8%, PME +0.7% and RHC +0.6%. Energy stocks are down as oil prices stabilise, with WDS off 0.4% and STO down 0.9%. In corporate news, PNV +15.8% recorded its best-ever monthly sales of $7.2m, BPT fell 8.1% on Trigg 1 well results, GQG +3.6% reported $5.9bn in net inflows, and EHE +13.3% received a revised non-binding proposal. In economic news, Australia’s GDP expanded 0.2% QoQ in Q1 2023, falling short of expectations for a 0.3% increase marking the sixth consecutive period of economic growth albeit the softest pace in the sequence. More troubling data from China, exports dropped by 7.5% YoY, reversing from an 8.5% growth in April, and imports fell 4.5% YoY marking the third straight month of falls supporting the weak domestic demand narrative. Asian markets outside of Japan are stronger, HK up 1.0%, China up 0.2% and Japan off 1.3%. Australian bond yields inverted, 10Y yield at 3.82%, and 2Y yield at 3.88%. Crypto under siege following SECs lawsuit against Binance, Bitcoin down 1.1%. Dow Jones futures down 8 points and Nasdaq futures down 10 points.

HIGHLIGHTS

  • Winners: PNV, EHE, GMD, IFM, LLL, SQ2, EMR.
  • Losers: BPT, ARU, IPL, CBO, GRR, SYR, A2M.
  • Positive sectors: Tech. Healthcare. Industrials.
  • Negative sectors: Banks. Oil and gas. REITs.
  • High 7164 Low 7118
  • Big Bank Basket: Falls to $163.75 (-1.0%)
  • All-Tech index: Up 0.6%
  • Gold Unchanged at $2940
  • Bitcoin:  Rallies to US$26965
  • Aussie Dollar: Pushes to 66.77c.
  • 10-Year Yield: Rises to 3.82%.
  • Asian markets: Mixed Japan down 1.3% and HK up 1.0% with China up 0.2%
  • US Futures: Dow down 8 Nasdaq down 10.

MAJOR MOVERS

  • EHE +13.3% HK tap in as Bain come back with higher offer.
  • PNV +15.8% US sales update.
  • GMD +7.0% getting closer to acquisition. SLR bid not enough.
  • APX +9.7% back in demand.
  • NVX +19.1% LGES enters into a JDA and US$30m investment agreement.
  • PAR +9.4% signs of life.
  • ADN +11.4% offtake term sheet.
  • LRS +8.8% Hors d’oeuvre dished up ahead of reserve upgrade.
  • BPT -8.1% still a disappointment. Trigg 1 miss.
  • MYR -3.7% retail woes.
  • SFR -3.0% NED retires.
  • BBN -7.8% broker downgrades.
  • PEB -73.7% Medicare coverage of CX Bladder to cease.
  • Speculative Stock of the Day: Alvo (ALV) – Agreement to acquire potential tier 1 Ionic Clay Bluebush RE project in Brazil.

COMPANY NEWS

  • Estia Health Ltd (EHE) – Bain Capital has submitted a revised non-binding proposal to acquire Estia Health at $3.20 cash per share. Estia Health has entered into a process deed with Bain Capital to advance the potential transaction.
  • Champion Iron (CIA) – Anticipates significant delays in iron ore sales as the transportation railway used to transport the ore from its mine to the port of Sept-Iles has been interrupted by forest fires in Quebec.
  • Origin Energy (ORG) – A consortium led by Brookfield and EIG has submitted an application to the ACCC for the acquisition of Origin Energy, with plans to take ownership of Origin’s Energy Markets business.
  • PointsBet (PBH) – Received support from eight of its top 10 shareholders, representing 44.6% of the issued capital, in favor of the sale of the company’s United States Business.
  • Novonix (NVX) – Entered into an agreement with LG Energy Solution for a joint R&D project on artificial graphite anode material for lithium-ion batteries, with the option for LG Energy Solution to purchase up to 50,000 tons of the material over 10 years.
  • Viva Energy Group (VEA) – Expects a monthly loss of up to $35m following compressor damage caused by a crane accident at its Geelong Refinery. The repairs are estimated to take three months, resulting in a Refining EBITDA loss of $25m to $35m per month, including in June, due to production and margin impacts.
  • Polynovo Ltd (PNV) – Recorded first-ever monthly sales of $7.2m, driven by strong performance in the US and the rest of the world.
  • Beach Energy Ltd (BPT) – Trigg 1 gas well in the Perth Basin did not yield recoverable gas due to tight reservoir conditions, leading to its abandonment. The planned Trigg 2 well will not be drilled, and the rig will move to the Trigg Northwest 1 location for further exploration.
  • GQG Partners (GQG) Reported $5.9bn in net inflows for the first five months of 2023.

ECONOMIC & OTHER HEADLINES

  • Australia’s economy expanded 0.2% in the March quarter, compared with 0.6% in the previous quarter, under forecasts of 0.3%.
  • Annual gross domestic product (GDP) expanded 2.3%, again, under the consensus of 2.4%.
  • The terms of trade rose 2.8%.

In a speech today at the Morgan Stanley 5th Australia Summit (a job interview perhaps?), Dr Phil came out very aggressively again:

“I want to make it clear, though, that the desire to preserve the gains in the labour market does not mean that the Board will tolerate higher inflation persisting. There is a limit to how long inflation can stay above the target band. The longer it stays there, the greater the risk that inflation expectations adjust and the harder, and more costly, it will be to get inflation back to target. If inflation stays high, this will damage the economy and all Australians will feel the effects”.

  • Goldman Sachs says it now expects the cash rate to peak at 4.85%, noting the Reserve Bank’s “hawkish” shift in its reaction to combat inflation. It comes as the central bank increased the cash rate to 4.1% at Tuesday’s June board meeting.
  • The broker is counting on the RBA to raise the cash rate by 0.25% for three consecutive months from July to September. It previously projected the terminal rate to be 4.35%.

ASIAN MARKETS

  • Chinese exports fell for the first time in three months in May, adding to risks in the world’s second-largest economy as global demand weakens. The decline was so sharp that export volumes came in below their levels at the start of the year.
  • Overseas shipments shrank 7.5% from a year ago to $284bn, official data showed Wednesday, worse than the median forecast for a 1.8% drop. Imports declined 4.5% to $218bn better than an expected drop of 8%, leaving a trade surplus of $66bn.

US AND EUROPEAN HEADLINES

  • European markets expected to open slightly higher. Germany’s industrial output in April underwhelming.
  • Blinken to visit China this month in sign of easing tensions.

And finally….

Clarence

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