Menu Close

FIVE at FIVE AU: Trump benefits from Musk fallout, RBA talks economics and ASX dragged down by health

view original post

The ASX is down today, dragged lower by tech and health.

The benchmark S&P/ASX200 dropped 36.00 points or 0.54% to 6,651.10. Over the last five days, the index has gained 0.68%, but is down 10.66% for the last year to date.

Bottom-performing stocks in this index were XERO Ltd down 6.38% and Megaport Ltd (ASX:MP1) down 6.07%.

In the news today

RBA minutes talk interest rates, inflation home loans and the economy

The Reserve Bank of Australia released its minutes today, covering a range of topics.

Inflation

Let’s start with inflation which it says will peak later in 2022, before declining back towards the 2-3% range in 2023.

“Inflation is expected to moderate as global supply-side problems continue to ease and commodity prices stabilise, even if at a high level,” RBA minutes from July’s meeting say.

“Higher interest rates will also help establish a more sustainable balance between the demand for and the supply of goods and services.”

Interest rates

“Members agreed that further steps would need to be taken to normalise monetary conditions in Australia over the months ahead.

“The size and timing of future interest rate increases will continue to be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market, including the risks to the outlook.

“The board remains committed to doing what is necessary to ensure that inflation in Australia returns to the target over time.”

According to Westpac’s Bill Evans, Australians could be looking at a 50 basis points increase in August,.

“The option of a 25 basis point increase is quickly dismissed, economic prospects are upbeat, while the need to contain inflationary expectations is paramount,” he says.

“Another 50 basis points in August seems highly likely.”

The 25 basis points rise in June was “a steady approach to withdrawing monetary policy stimulus and that was appropriate in an uncertain environment” and while “some central banks had been increasing policy rates in 50 basis point increments, these central banks meet less frequently than the Reserve Bank Board…. on balance members agreed to a 50 basis point adjustment.”

For July “members considered the possibility of raising interest rates by 25 basis points or 50 basis points” and “agreed that arguments for raising interest rates by 50 basis points were stronger”.

Evans said, “the level of interest rates was still very low for an economy with a tight labour market and facing a period of higher inflation. Members agreed that further steps would need to be taken to normalise monetary conditions in Australia over months ahead.”

The neutral rate

When asked about the so-called neutral rate of cash, RBA deputy governor Michelle Bullock said, “We estimated – it is a wide range of estimates – but we thought it might, (be a) real rate between half a percentage point and one-and-half percentage points.

“So somewhere in that range. That’s quite a range. But that’s actually only the real component. The nominal rate which corresponds to that is going to depend on what inflation expectations are, and inflation expectations are very difficult to measure as well.”

“They are our most recent estimates for it, but it’s really really difficult.”

“What we do know is that we are probably well below (neutral).”

Australian households

According to Bullock, households are well positioned for rate hikes.

“Much of the debt is held by high-income households that have the ability to service their debt and many borrowers are already making repayments well above what is required,” Bullock said.

“Furthermore, those on very low fixed-rate loans have some time to prepare themselves for higher interest rates.

“Some households will find interest rate rises impacting their debt servicing burden and cash flow.

“While the current strong growth in employment means that people will have jobs to service their mortgages, the way the risks play out will be influenced by the future path of employment growth.

“This, along with the board’s assessment of the outlook for inflation, will be important considerations in deciding the size and timing of future interest rate increases.”

Domestic economic outlook

“Timely data indicated that growth in domestic demand had remained solid in the June quarter, led by household spending,” the RBA Minutes say.

“Although consumer sentiment had declined notably, household consumption was supported by growth in disposable income, the increase in saving and wealth that occurred earlier in the pandemic, and the rebound in discretionary services spending.

“The pipeline of residential dwelling construction and infrastructure activity remained large, although capacity constraints were slowing the pace at which the pipeline could be worked through, and business surveys and information from the bank’s liaison program suggested the investment intentions of non-mining firms remained at or above average levels.

“Members agreed that the outlook for domestic economic activity had eased a little, with a key source of uncertainty relating to the response of households to rising inflation, higher interest rates and declining housing prices in some cities.”

Here’s a look at some of the top small cap stories of the day.

International Graphite discovers new graphite zone in exploration drilling at Springdale Project in Western Australia

“The drilling is building our confidence and understanding of the size and quality of the Springdale mineral resource. Initial results are very promising and support the positive indicators received from past aeromagnetic surveying,” International Graphite Ltd (ASX:IG6) executive chair Phil Hearse said.

Read more

Perseus Mining set to extend Edikan life with new Nkosuo gold resources

Perseus Mining Ltd (ASX:PRU, TSX:PRU, OTC:PMNXF) expects to increase the life of the Edikan gold operations in Ghana by 18 to 24 months after completing a feasibility study on the nearby Nkosuo Project and adding considerable mineral resources and ore reserves.

Read more

ClearVue Technologies secures US supply chain through agreement with Advanced Impact Technologies

“This agreement with Advanced Impact Technologies is all about securing ClearVue Technologies Ltd (ASX:CPV, OTCQB:CVUEF)’s product delivery in the North American market,” executive chair Victor Rosenberg said.

Read more

First Graphene sees out June quarter with record revenue, secures strong forward orders for FY2023

First Graphene Ltd (ASX:FGR, OTCQB:FGPHF) closed out the last quarter of the 2022 financial year with record revenue of A$359,000, thanks to several significant orders, sending its full-year revenue soaring 111% to A$723,000 from a year ago.

Read more

Castillo Copper boosts grades up to 10x with tests on ore from Big One within NWQ Copper Project

Castillo Copper Ltd (LSE:CCZ, ASX:CCZ) has further de-risked the Big One deposit of the NWQ Copper Project in Queensland with proof-of-concept metallurgical test work producing a copper concentrate up to 10 times purer than the original grade.

Read more

On your six

Ex-president Donald Trump, who would make for a great mask in a Point Break remake (ignoring the pretty poor last attempt at a remake), and his buddy Elon Musk have fallen out and that’s proved a boon for Trump-linked special purpose acquisition company (SPAC) Digital World Acquisition Corp (DWAC).

Trump-linked SPAC rallies against “the tyranny of Big Tech”

DWAC is poised to take Trump’s Truth Social social media platform, which became his soapbox after Twitter banned the real estate tycoon “due to the risk of further incitement of violence” stemming from the January 6 capitol riots, public through a reverse merger.

Read more

The one for good luck

Besra Gold puts in the hard yards to increase resource and valuation

Besra Gold Ltd (ASX:BEZ)’s Ray Shaw joins Proactive’s Elisha Newell to discuss drill results at its highly advanced Jugan Project in Malaysia.

Watch