- ASX 200 Index lost ground, following losses in energy and consumer stocks.
- The shutdown of South32's GEMCO led to Jupiter Mines' share rallying almost 20% in the last two sessions.
- Apple's stock declined by 4.1% following news of a lawsuit from the US Department of Justice for alleged monopolistic practices.
The ASX 200 Index closed lower to near 7,770, down by approximately 0.15% on Friday, snapping its winning streak that began on March 15. The index's downturn was primarily attributed to losses in energy and consumer stocks. The A-VIX has experienced a sharp decline, dropping by 0.92% to 12.92. The All Ordinaries Index is down by 0.32%, currently at 8,019.
Reserve Bank of Australia (RBA) maintained interest rates at a 12-year high of 4.35% on Tuesday, consistent with its stance for the third consecutive meeting. RBA's hawkish stance could have impacted the Australian equity market.
In the ASX 200 Index, Genesis Minerals experienced a significant decline, plunging to 1.792, marking a decrease of 7.45%. Telix Pharmaceuticals dropped to 12.620, down by 4.97%. On the positive side, Fisher & Paykel Healthcare showed strong performance, trading near 23.560, with an increase of 5.0%. Additionally, Light & Wonder rose to 165.02, up by 2.30%.
However, Wall Street experienced upward momentum overnight, with all three major benchmarks setting record highs. This surge followed positive sentiment from the US Federal Reserve (Fed), reaffirming its outlook for three interest rate cuts this year in its latest policy decision.
The surge was somewhat tempered by a 4.1% decline in Apple stock, as the company faces a lawsuit from the US Department of Justice for alleged monopolistic practices. The Justice Department contended that Apple makes it challenging for competitors to integrate with the iPhone's hardware and software features.
South32's Groote Eylandt Mining Company (GEMCO) has halted operations due to Cyclone Megan, resulting in the disruption of approximately 10% of the global manganese supply. For the fiscal year 2024, prior guidance indicated production of 1.7 million tonnes from GEMCO. The supply disruption could lead to a tighter manganese market in the short term.
The shutdown of GEMCO has had a positive impact on Jupiter Mines, the largest ASX-listed manganese producer, with its share rallying almost 20% in the last two sessions. This surge has lifted the company's 12-month performance to break even. Jupiter Mines aims to increase production by 300% over the next five years.
Altech Batteries has disclosed favorable outcomes from a definitive feasibility study (DFS) for its Cerenergy sodium chloride solid-state battery project in Germany. The project, slated for construction on Altech's land at the Schwarze Pumpe Industrial Park in Saxony, is anticipated to establish a new benchmark in sustainable energy solutions. It is projected to have an annual capacity of 120 1MWh grid packs.
RBA FAQs
What is the Reserve Bank of Australia and how does it influence the Australian Dollar?
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high-interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
How does inflation data impact the value of the Australian Dollar?
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
How does economic data influence the value of the Australian Dollar?
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
What is Quantitative Easing (QE) and how does it affect the Australian Dollar?
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) to buy assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
What is Quantitative tightening (QT) and how does it affect the Australian Dollar?
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets, and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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