Banks, rates and potential bidding war for Anglo American keep investors guessing

It’s shaping up as an eventful week on the local bourse with bank earnings reports, an RBA rate decision and a potential bidding war for BHP-target Anglo American all on the agenda.

Wall Street stocks ended solidly higher on Friday. Picture: Getty Images

Australian shares should begin the week in positive territory with interest rates, bank earnings and a potential bidding war for BHP target Anglo American the main focus.

Wall Street stocks ended solidly higher on Friday on the back of data showing a slowdown in hiring and an uptick in unemployment uptick – fuelling hope that the US Federal Reserve could start lowering interest rates soon.

ASX futures indicate the ASX 200, which closed at 7629 points on Friday, could open 0.3 per cent higher on Monday.

In London, the FTSE 100 hit a new record high on Friday as Anglo American shares rallied after a report that Swiss-based commodities giant Glencore was considering a move on the British group.

“A bidding war for an FTSE beast like Anglo would be just what investors have been hankering for,” Finalto analyst Neil Wilson said.

London-based Anglo American rejected a blockbuster £31bn ($59bn) all-share offer from BHP late last month, calling the bid opportunistic and saying that it undervalued the company and its future prospects.

It is understood that Glencore has not yet approached Anglo American about an offer.

“We don’t comment on market rumours or speculation,” a Glencore spokesman said.

But it is understood the discussions are internal and preliminary at this stage and may not result in an approach.

Shares in Anglo American closed up 1.2 per cent, while Glencore fell 1.4 per cent.

In the US, jobs in the world’s biggest economy grew by 175,000 last month, down from a revised March figure of 315,000, while wages rose by 0.2 per cent, said the US Department of Labor.

There is market speculation that Glencore could launch a rival bid for Anglo American.

Analysts at Forex.com had expected the US economy to add 238,000 jobs last month, and wages to increase by 0.3 per cent month on month.

“This is a rare miss for the US jobs market which could potentially spell the end of the ‘higher for longer’ rhetoric we have become accustomed to,” said Mahmoud Alkudsi, senior market analyst at Abu Dhabi-based financial services firm ADSS.

The Fed kept rates at a 23-year high last week to fight stubborn inflation.

Markets had started the year expecting the Fed would cut rates six times this year, but those expectations dwindled to one or two.

Australian investors will be mainly focused on the Reserve Bank of Australia’s interest rate decision on Tuesday.

A Bloomberg survey of economists finds 23 of 24 now expect the RBA board to keep the cash rate target at 4.35 per cent at this week’s meeting, with 12 predicting a 25 basis point cut by November and 7 flagging a 50bp cut to 3.85 per cent by mid-2025.

Capital Economics is the only forecaster predicting a rate hike this week.

HSBC chief economist Paul Bloxham says the upside surprise to first quarter inflation means the RBA board will consider, but not deliver, a rate hike at its meeting this week.

“Our central case is that the RBA will be on hold through 2024, with a shallow cutting phase starting in Q1 2025 (60 basis points of cuts in 2025). That said, we see a 40 per cent chance that the RBA could raise its cash rate again in H2 2024 and a risk that the cash rate is on hold for longer than our central case, partly depending on actions by the US Fed.”

Mr Bloxham said that since the RBA board last met six weeks ago, the data flow has shown that inflation is falling more slowly and the jobs market is loosening more gradually than the central bank had been forecasting.

“In short, the economy is still moving in the right direction for the RBA to achieve its inflation target, but taking longer than expected,” he said.

Mr Bloxham says the RBA is likely to revise up its near-term core inflation forecast.

Elsewhere on the Australian bourse this week, Westpac will deliver its half-year accounts, followed by ANZ on Tuesday and CBA’s third quarter trading update on Thursday.

“Lenders are likely to report weaker first-half profit as high operating costs and competition to sell mortgages and deposits squeeze margins,” CommSec economists said.

with AFP