The Match Out: ASX up as the RBA pivots on rates, Seek downgrades

The main focus of the market was on the RBA call at 2.30 pm this afternoon as the Central bank decided it had had enough of hiking rates for now in line with the market’s view, the first hold after 10 consecutive hikes by Governor Lowe. Energy was the place to be again today, though it was more the coal names carry that sector higher while yesterday it was the oil and gas stocks. Tech was also strong, defying the weakness in the Nasdaq overnight. Materials were the main drag on the index, mostly as a result of weakness in iron ore.

• The ASX 200 finished up +13pts/ +0.18% at 7236
• The Energy sector was best on ground again (+1.31%) while Tech (+1.19%) & Telcos (+0.84%) were also strong.
• Materials (-0.89%) was the weakest while Utilities (-0.49%) was the only other sector to close lower.
• The RBA held rates at 3.60% today as they assess the impact an unprecedented run of hikes has on the economy and inflation – more on that below.
• Seek (ASX: SEK) -0.95% marginally downgraded FY23 Revenue guidance on softer job ad volumes, though earnings were left unchanged. More on that below.
• St Barbara (ASX: SBM) halt, management joined potential acquirer Genesis (GMD) to hash out new terms for a deal following weak production update at St Barbara’s key Leonora mine. We expect to hear more tomorrow
• Suncorp (ASX: SUN) -0.66%, softened after the ACCC flagged a number of potential concerns with the sale of their banking arm to ANZ. We suspect this will be a drawn-out process with the Queensland Government also required to sign off on the deal.
• AGL Energy (ASX: AGL) -0.61% saw a big line of stock transact this morning, ~$150m worth at $8.30 which was a 9c premium to last, which implies it was buyer-led. We own AGL in our Income Portfolio
• Iron Ore was ~2.5% lower in Asia today weighing on the bulk miners. BHP felt the most pain, falling -2.19%.
• Gold gave back some strength from overnight, falling -0.25% to ~US$1980 in Asian trade. Last night’s move was enough to support gold stocks today though, Evolution (EVN) a notable gainer up +3.53%
• Asian stocks were mixed today, Japan’s Nikkei up +0.35% but the Hang Seng in Hong Kong Hong -0.76%
• US Futures are flat to lower at our close, Nasdaq the weakest -0.15%.

ASX 200 - Intraday

ASX 200 - Daily

RBA sits tight – Rates on hold at 3.60%

As expected, the RBA kept rates on hold today at 3.60%, the first meeting of inaction in the last 11, “The decision to hold interest rates steady this month provides the board with more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty,” Dr Lowe said in a statement at the end of the monthly meeting. They went on to say “In assessing when and how much further interest rates need to increase, the board will be paying close attention to developments in the global economy, trends in household spending and the outlook for inflation and the labour market.”

The chart below shows the change in Futures pricing was minimal post today’s announcement, confirming this was a widely expected and priced in scenario. The market is telling us that rates have now reached their peak, although it’s rarely as simple as that, given this pricing respects a wide range of possible outcomes that are being backed to varying degrees. The AUD sold off -0.50% on the news, having been up 1.5% overnight.

Australian Interest Rate Futures

Seek (ASX: SEK) $23.98

SEK -0.95%: The online recruitment platform downgraded full-year revenue guidance today, but maintained FY earnings expectations showing their ability to pull the cost levers in response to softer demand for job ads. The stock dropped ~6% early, which was ludicrous given they said revenue would be approximately $15m lower than previously thought, now tipping a number of $1.245bn. That’s a very small incremental downgrade and to MM is more of a positive with respect to disclosure – something we value from the companies we own. While we like SEK believing they are a high-quality operator, they’re not cheap for the growth being delivered and we intend to be active around our holding.

Broker Moves

• Bank of Queensland (ASX: BOQ) Cut to Negative at Evans & Partners Pty Ltd
• Dexus (ASX: DXS) Reinstated Neutral at Citi
• Mineral Resources (ASX: MIN) Cut to Hold at Jefferies; PT A$85
• Lovisa (ASX: LOV) Raised to Positive at Evans & Partners Pty Ltd
• Chalice (ASX: CHN) Mining Cut to Neutral at JPMorgan; PT A$7.60
• Corporate Travel (ASX: CTD) Rated New Hold at Jefferies; PT A$18.50

Major Movers Today

Have a great night

The Market Matters Team

Make informed investment decisions

At Market Matters, we write a straight-talking, concise, twice daily note about our experiences, the stocks we like, the stocks we don’t, the themes that you should be across and the risks as we see them. Click here for your free trial.

The Match Out will be available each day after the market close. Follow my profile to be notified when the latest report is live.