ASX200 edges lower on hawkish RBA despite materials boom

It was a tale of two central banks on Tuesday as investors digested hawkish rhetoric from the Reserve Bank of Australia on inflation and interest rates and fresh support measures from the People’s Bank of China.

The benchmark ASX200 slipped 10.9 points, or 0.13 per cent, to settle at 8142 points, while the broader All Ordinaries index edged up a single point to close at 8385.1.

Tech stocks lifted 0.4 per cent to 3417.

Six of 11 industry sectors ended in the red, with the big banks driving a 1.87 per cent slump in financials.

Commonwealth Bank lost 3.04 per cent to $138.06 a share, Westpac fell 2.35 per cent to $32.82, ANZ shed 1.86 per cent to $31.11 and NAB tumbled 3.02 per cent to $38.50.

Staples also continued yesterday’s sharp sell-off, with the sector falling another 1.86 per cent.

Woolworths declined 2.93 per cent to $42.80 and Coles retreated 3.01 per cent to $18.03.

But the materials sector soared 2.43 per cent after China’s central bank cut several key lending measures to prop up the Middle Kingdom’s ailing economy, including cash reserve requirements for Chinese banks and down payment rules for second homes.

BHP surged 3.29 per cent to $41.12, Rio Tinto rallied 3.66 per cent to $116.45 and Fortescue climbed 1.75 per cent to $18.

“Today’s announcement removes some of the downside risks to Chinese growth and helps to end the downward spiral in the Chinese property market that has been observed over the past 15 months,” IG markets analyst Tony Sycamore said.

The bourse lifted in morning trade but faded throughout the day as investors waited for the 2.30pm release of the RBA’s cash rate decision.

The board held rates steady at 4.35 per cent, as widely expected, and maintained its hawkish stance.

“The board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome,” the RBA read.

Most investors are beginning to write off a cut in 2024, with VanEck head of investments and capital markets Russel Chesler arguing rate cuts could push out “well into 2025”.

“The markets are pricing in cuts to start by February 2025, but we do not believe this is likely,” he said.

“Many data points still indicate strength in the economy and persistent inflationary pressure.

“We still have a tight job market, with the unemployment rate at 4.2 per cent for July and August.

“The latest ABS immigration numbers also look robust, with net migration reaching a record 509,754 for that period.

“With such strong migration numbers and a lack of new housing, we expect house prices and rents will continue to put upward pressure on inflation as demand outstrips supply.

“Retail sales, while flat for July, have maintained the higher levels achieved from mid-year sales activity, indicating that consumer spending has not yet curtailed – and may not any time soon, given the July tax cuts continue to put more take-home pay in peoples’ pockets.

“Our view remains that it is highly unlikely that there will be any rate cuts until well into 2025.”

Wall St edged up overnight on Monday, with the Dow Jones lifting 61 points, or 0.15 per cent, to 42,124, while the S and P 500 index rose 0.28 per cent to 5718 and the tech-heavy Nasdaq climbed 0.14 per cent to 17,974.

In corporate news, fashion retailer Cettire exploded higher 79 per cent after confirming an audited $742.3m in sales revenue for the 2024 financial year.

The top gainer on the ASX200 was uranium miner Paladin Energy, leaping 10.64 per cent to $10.91.

The largest laggard was gaming company Light and Wonder, which tumbled 17.8 per cent to $135.59 after revealing it had lost a court fight with rival Aristocrat Leisure.

The Aussie dollar lost 0.07 per cent to buy US68.3c at the closing bell.