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Wall Street records propel ASX higher, RBA follow-up comments ‘settle nerves’



Record highs on US markets propelled the ASX firmly into the green, while fresh comments on interest rates have settled nerves.

The Australian sharemarket was propelled higher by a positive lead from Wall Street, but managed to outperform it, while follow up comments to yesterday’s rates decision appear to have “settled nerves”.

The benchmark S&P/ASX200 index rallied 0.93 per cent to 7392.7, while the All Ordinaries Index strengthened 0.87 per cent to 7713.

CommSec analyst Steven Daghlian said the local bourse outperformed US markets, which hit fresh record highs overnight, with the Dow Jones Industrial Average closing above 36,000 for the first time, up 0.4 per cent.

After the Reserve Bank of Australia held its monthly board meeting on Tuesday, keeping the cash rate at a historic-low 0.1 per cent, governor Philip Lowe said he strongly disagreed with current market pricing for hikes in 2022.

“He basically said hikes next year, while not impossible, are extremely unlikely,” Mr Daghlian said.

“But he did say it’s possible for rates to rise in 2023, so it seems to have settled nerves, to an extent.”

AMP Capital chief economist Shane Oliver remains convinced both Australian and US central banks will “start raising rates later next year”.

OMG chief executive Ivan Tchourilov noted reactions to the RBA meeting had been mixed, with the central bank “refusing to match the hawkish outlook of other major financial institutions”, and credited the ASX rise to the upbeat US lead.

“There weren’t a lot of losers today – even iron ore miners were in the green, despite iron ore prices crashing overnight,” Mr Tchourilov said.

Mr Daghlian said the iron ore price had fallen for five straight days, back below $US100 per tonne, and had tumbled about 20 per cent in a little over a week.

“This is on some fresh restrictions on steel production in China in a bid to control pollution ahead of next year’s Beijing Olympics,” he said.

Rio Tinto lifted 1.17 per cent to $89.70, BHP added 1.07 per cent to $35.94 and Fortescue advanced 3.08 per cent to $14.38.

A particularly strong performer was lithium miner Orocobre Ltd, which surged 6.7 per cent to $9.70.

The banks gained ground after three straight trading days of losses.

Commonwealth Bank revealed it will become Australia’s first bank to offer customers the ability to buy, sell and hold cryptocurrency assets, including Bitcoin and Ethereum, directly through its CommBank app.

The pilot will start in coming weeks and CBA intends to progressively rollout more features next year.

CBA put on 1.17 per cent to $107, National Australia Bank rose 1.35 per cent to $28.58, Westpac inched two cents higher to $23.15 and ANZ gained 2.26 per cent to $28.47.

Investors applauded AMP announcing it had completed its exit from life insurance after more than 170 years in the business, selling its 19.13 per cent interest in Resolution Life Australasia for $524m.

The group sold the majority of the business last year for $3bn and says the divestment of the remaining stake provides balance sheet flexibility ahead of the planned demerger of its private markets division, which holds real estate and infrastructure investments.

“It’s a welcome capital injection for the wealth manager, if their new fancy building in Sydney CBD is anything to go by,” Mr Tchourilov said.

“AMP’s streamlining plans hit a hitch when the company was rinsed at the 2019 Hayne Royal Commission – it seems they are now starting to find their feet again.

“They’re focusing on banking and wealth management and divesting from the rest, usually maintaining a stake in the divested entity.”

AMP shares leapt 9.3 per cent to $1.17.

Telstra renewed its contract with the Department of Defence, clinching a five-year deal worth more than $1bn, but its shares didn’t budge from $3.90.

Packing giant Amcor firmed 0.75 per cent to $16.11 after delivering a solid first quarter result and reaffirming its full-year outlook, despite sales in some parts of the business being hit by raw material shortages.

Insurance Australia Group continued to backtrack, losing 1.11 per cent to $4.45 a day after downgrading its full-year guidance due to higher estimates for hail and severe storm damage claims, which sent its shares tumbling more than 7 per cent on Tuesday.

“Four brokers have reduced their expectations for its shares over the next 12 months,” Mr Daghlian said.

Domino’s Pizza held its annual general meeting, announcing its commitment to net zero emissions by 2050, flagging its plan to operate more than 6650 stores by 2030 – up from 3169 currently – and also warning it expects to be faced with higher food and energy costs next year.

Domino’s shares eased 0.13 per cent to $142.30.

In economic news, building approvals fell by 4.3 per cent in September, but were up 12.8 per cent on a year ago.

Approvals to build detached houses dropped 16.1 per cent in September – which CommSec senior economist Ryan Felsman said was the biggest monthly decline in 21 years – but higher-density apartment approvals lifted 17.4 per cent.

“Building construction is expected to remain elevated over the next 12 months due to strong homebuyer demand,” Mr Felsman said.

“Builders and their contractors are under pressure to deliver projects on-time and on-budget as they work through a huge pipeline of residential, commercial and infrastructure-related construction work.

“Already construction companies are experiencing skilled trades labour shortages and rising building materials costs due to supply-chain disruptions.”

The Aussie dollar was buying 74.32 US cents, 54.53 British pence and 64.15 Euro cents in afternoon trade.

Originally published as Australian sharemarket surges into the green, notching up gains across the board




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Rollercoaster session for ASX, fails to hold onto post-Reserve Bank of Australia meeting rally



The ASX surged after the RBA flagged keeping the cash rate at its historic low for another two years, but couldn’t hold onto the gains.

The Australian sharemarket slumped lower despite positive overseas leads and after failing to hold onto its post Reserve Bank of Australia meeting rally.

The benchmark S&P/ASX200 index closed 0.63 per cent lower at 7324.3, while the All Ordinaries Index erased 0.59 per cent to 7646.6.

Ord Minnett said US stocks rose overnight in generally lacklustre trade, as investors looked ahead to the Federal Reserve’s monetary policy meeting on Wednesday, while European stocks hit record highs as expectations of interest rate hikes supported bank stocks.

CommSec analyst Steven Daghlian said the local bourse started out in the green but faded as investors traded tentatively awaiting the outcome of our own central bank’s monthly board meeting.

OMG chief executive Ivan Tchourilov said it had been a rollercoaster, with the ASX gaining ground after the RBA determined to keep the cash rate on hold, as expected, while noting higher than expected inflation.

“The Reserve did well to remain ambiguous on expectations, although we’re still looking at a 2023 interest rate hike instead of the previous 2024 forecast,” Mr Tchourilov said.

“Commodity prices were mixed, as was our resources sector.”

After iron ore prices slumped, Rio Tinto lost 2.54 per cent to $88.66, BHP dropped 2.34 per cent to $35.56, Fortescue shed 2.65 per cent to $13.95 and Champion Iron sank 7.22 per cent to $4.24.

Nickel miner IGO plunged 8.42 per cent to $8.92, while Whitehaven Coal plummeted 9.54 per cent to $2.37.

Origin Energy slid 1.95 per cent to $5.02, while Beach Energy dropped 3.93 per cent to $1.34 after announcing its managing director and chief executive Matt Kay had handed in his resignation to pursue other opportunities.

But battery minerals company Magnis Energy Technologies was a stellar performer, rocketing 18.48 per cent to 54.5 cents.

“Magnis released their annual report after market close yesterday and the market is starting to see some value in Magnis’ proposition,” Mr Tchourilov said.

“Despite operating at a loss without a finished product, they have $665m in binding offtake sales lined up for 2022.

“The patented battery technology is gaining traction in the US market, where a new battery plant is being built in New York to meet demand.

“Magnis has already returned 280 per cent in share price this year, but will be one to watch especially closely into 2022 when battery production begins to ramp up.”

Insurance providers retreated after Insurance Australia Group downgraded its full-year guidance, upping its assumptions for hail and severe storm impacts in South Australia and Victoria last month to $1.045bn, from $765m previously.

“Cost allowances for natural perils have been lifted significantly after the first quarter came in more expensive than expected,” Mr Tchourilov said.

“Margin guidance for the period has slipped a full 3 per cent and they’re allowing room for extreme weather events to continue into next year.

“IAG is maintaining strong underlying performance as reported in its end of year results. However, if the first quarter is anything to go by, it will be an expensive year for insurance providers.”

IAG shares tumbled 7.03 per cent to $4.50, while Suncorp gave up 4.15 per cent to $11.31 and QBE softened 2.39 per cent to $11.83.

Financial technology platform provider Praemium Ltd leapt 14.46 per cent to $1.42 after knocking back Netwealth Group’s $785m takeover offer, saying the bid did not appropriately value its current performance and near-term trajectory.

Wealth manager Netwealth gave up 2.06 per cent to $17.15.

ANZ fell 1.1 per cent to $27.84, Commonwealth Bank backtracked 0.5 per cent to $105.76, National Australia Bank declined 0.88 per cent to $28.20 and Westpac slumped 2.73 per cent to $23.13 a day after releasing disappointing full-year results.

However, Morningstar equity analyst Nathan Zaia said Westpac could fix its productivity issues, noting it was the cheapest of the major banks.

Property stocks fared well, with Goodman Group surging 5.57 per cent to $23.49 after upgrading its full-year guidance, while Charter Hall Group rose 3.28 per cent to $18.59 after doing the same on Monday, while Lendlease added 2.39 per cent to $10.70.

Mr Daghlian said Goodman, the largest industrial property group on the ASX, which operates in 17 countries, was pocketing higher earnings partly because of demand for warehouses had surged during the pandemic-driven e-commerce boom.

Meal kit delivery service Marley Spoon continued to tumble after downgrading its full-year guidance last week, sinking 11.9 per cent to 92.5 cents.

The Aussie dollar was fetching 74.76 US cents, 54.76 British pence and 64.4 Euro cents in afternoon trade.

Originally published as Rollercoaster session for ASX, fails to hold onto post-Reserve Bank of Australia meeting rally




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Residential property prices keep climbing as investors push out would-be first home buyers



Australian housing prices keep creeping higher, pushing more would-be first home buyers off the property ladder and fuelling rate hike talk.

Australian residential property prices keep creeping higher, but experts believe the peak of the current cycle is not far off, with the Reserve Bank tipped to increase interest rates sooner than flagged.

CoreLogic data released on Monday showed national dwelling values inched up 1.5 per cent in October, down from a peak monthly growth rate of 2.8 per cent in March.

That’s a touch higher than predicted by CommSec (about 1.3 per cent) and AMP Capital chief economist Shane Oliver (1.4 per cent).

The rise brings the national price growth rate over the past 12 months to a whopping 21.6 per cent.

But CoreLogic reiterated what it had been saying for months – the red-hot property market is slowly losing momentum.

That may be cold comfort for already priced out, would-be first home buyers.

“Housing prices continue to outpace wages by a ratio of about 12:1,” CoreLogic research director Tim Lawless said.

“This is one of the reasons why first home buyers are becoming a progressively smaller component of housing demand.”

Other reasons are the end of stimulus measures such as HomeBuilder, more supply on the market – with new listings surging by 47 per cent since hitting a low in September – and, from Monday, the tightening of mortgage assessments in a bid to slow new lending at high debt-to-income ratios.

Inflation data last week was higher than expected, with the most significant price rise being for new homes bought by owner-occupiers.

Economists say pressure is accordingly building on the RBA to up the cash rate from its historic low of 0.1 per cent.

The central bank holds its monthly meeting on Tuesday and every word in the statement that follows will be combed for even the slightest shift in its thinking.

“We now expect the first rate hike in a year’s time,” Mr Oliver said in his latest market update.

“The RBA won’t rush into a rate hike because it wants to see that ‘inflation is sustainably within the target range’.”

The RBA has repeatedly said a hike was unlikely before 2024.

“However, with the economy recovering, we believe that the conditions for the start of rate hikes will now be in place by late 2022, so we expect the first hike to be in November 2022, taking the cash rate to 0.25 per cent, followed by a 0.25 per cent hike in December 2022, taking the cash rate to 0.5 per cent by the end of next year,” Mr Oliver said.

Many other economists are tipping an RBA move in early 2023.

Meanwhile, as housing continues to become less and less affordable, CoreLogic expects demand will skew towards higher density sectors of the market, especially in Sydney, where the gap between the median house and unit value is now close to $500,000.

“With investors becoming a larger component of new housing finance, we may see more demand flowing into medium to high density properties,” Mr Lawless said.

“Investor demand across the unit sector could be bolstered as overseas borders open, which is likely to have a positive impact on rental demand, especially across inner city unit precincts.”

Australia’s apartment markets have generally recorded a lower rate of growth compared to houses, CoreLogic says.

Also on Monday, Australian Bureau of Statistics figures showed the continuation of a trend seen over recent months – investor mortgage commitments rising as owner-occupier new loan commitments fell.

MEDIAN VALUES AROUND AUSTRALIA:

Sydney: $1.071m (up 25.3 per cent over 12 months)

Canberra: $864,909 (up 25.5 per cent)

Melbourne: $780,303 (up 16.37 per cent)

Hobart: $678,170 (up 28.06 per cent)

Brisbane: $642,097 (up 22.3 per cent)

Adelaide: $543,265 (up 20.07 per cent)

Perth: $526,625 (up 16.37 per cent)

Darwin: $490,236 (up 19.28 per cent)

Originally published as Residential property prices keep climbing as investors push out would-be first home buyers




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