ASX 200 falls from record high; RBA didn't consider a rate hike; Hanwha, Austal confirm talks

Inflation 'high' but returning to target: RBA minutes. Austal gains on Hanwha takeover talks. Mesoblast surge continues. Orora slumps on earnings, Saverglass downgrades. Brickworks CEO's 25-year reign ends. 

Economic data and rates are back in focus for investors returning from the Easter break. Picture: Gaye Gerard

Welcome to the Trading Day blog for Tuesday, April 2. The ASX 200 index closed 0.1 per cent lower at 7887.90 points, after hitting a new intraday high earlier in the session.

The index hit a fresh intraday record of 7910.5 points, but has given up all of its gains to trade below its all-time closing high of 7896.9 points, which it reached on Thursday. The Aussie dollar is trading near US64.90c.

Updates

4:31 pm April 2, 2024

ASX 200 ends flat after record high

David Rogers

Australia's share market fades along with US futures after hitting a fresh record high in quiet trading after the Easter long weekend.

The ASX 200 index ends down 0.1 per cent at 7887.9 after rising to 7910.5.

Nine of 11 sectors fall with communications, health care, real estate, consumer discretionary, tech, staples and industrials underperforming after the overall market got a boost from end-of-quarter rebalancing last week.

CSL falls 0.8 per cent, Wesfarmers loses 1 per cent, Goodman falls 1.3 per cent, ResMed drops 3 per cent, Brambles falls 2.2 per cent and Telstra slips 1 per cent.

Orora drops 15 per cent on a profit warning.

S&P futures fall 0.2 per cent after the US benchmark shied off a record high on Monday as stronger than expected ISM Manufacturing data damped expectations of US interest rate cuts, sparking a jump in bond yields.

Singapore iron ore futures fall to $100.70 a tonne after bouncing from a 10-month low of $US95.40 to $US102.80 on China's stronger than expected official manufacturing PMI data released over the weekend.

But BHP rises 1.9 per cent and Rio Tinto adds 0.7 per cent. Newmont jumps 4.9 per cent after spot gold hit a record high of $US2265.73 an ounce.

Austal jumps 11 per cent after rebuffing a takeover from South Korea's Hanwha Ocean.

2:20 pm April 2, 2024 Highlight

ACCC vs Hutchinson, union fight continues

Valerina Changarathil

Competition regulator ACCC's long-running legal battle against construction group J Hutchinson and the Construction, Forestry and Maritime Employees Union (CFMEU) is set to continue.

The ACCC first instituted proceedings against Hutchinson and the CFMEU in December 2020, claiming the two parties allegedly made an arrangement or understanding to boycott a waterproofing subcontractor at the Brisbane Southpoint A apartments construction site in 2016, meaning the subcontractor could no longer perform the work.

A Federal Court on February 14, 2022, found that by making and acting on the agreement, Hutchinson contravened sections 45E and 45EA of the Competition and Consumer Act. The CFMEU was found to have been knowingly concerned in, or party to, the contraventions by Hutchinson.

On February 29 this year, the full Federal Court upheld appeals by the CFMEU and Hutchinson against the first-instance decision.

Now the ACCC is seeking special leave to appeal to the High Court to obtain its "ruling on what is required to demonstrate that parties have reached an anti-competitive arrangement or understanding", ACCC commissioner Liza Carver said. "Anti-competitive conduct in any industry can do great harm to the economy, to competitors and ultimately to consumers, and taking appropriate enforcement action against such conduct is a core function of the ACCC."

2:05 pm April 2, 2024

Minutes show 'comfortably on hold': JPM

David Rogers

RBA minutes show the board was "comfortably on hold, rather than finely balancing a number of options", according to J.P. Morgan.

The minutes didn't explicitly say the board didn't consider a rate hike.

But they stopped linking positives and negatives in the economy to the pros and cons of specific policy actions, notes JPM chief economist, Ben Jarman..

"This explicit signalling of close calls was always going to be difficult to get out of, and we had thought it would happen later, because keeping some explicit consideration of a hike appeared consistent with the 'not ruling anything in or out' message from the statement and press conference," Mr Jarman says.

"That has been done early today, but in incomplete fashion as the 'not ruling anything in or out' reference itself remains in the minutes with respect to 'future changes in the cash rate'.

"The intent presumably is to signal a board comfortably on hold, rather than finely balancing a number of options."

2:00 pm April 2, 2024

ASX 200 gives up gains

Valerina Changarathil

The ASX 200 index has given up all its early gains and is now trading 0.1 per cent lower at 7891.3 – below its all-time record close of 7896.9 points on Thursday.

The index hit a fresh intraday peak of 7910.5 points immediately after the RBA minutes were released at 11.30am AEDT. But it is now treading water as mining gains are offset by declines in healthcare and communications stocks.

US futures are down about 0.2 per cent, suggesting a subdued start for Wall Street, following its mixed overnight session.

Iron ore futures are weaker near $US101.15 per tonne on the Singapore exchange after hitting a 10-month low on Monday.

12:31 pm April 2, 2024

ASX 200 hits record amid iron ore rebound

David Rogers

Australia's share market remains buoyant after hitting a fresh record high early Tuesday as iron ore prices rebounded after China's stronger than expected manufacturing data over the weekend.

The S&P/ASX 200 index is flat at 7897 points after hitting an intraday low of 7867.8 in opening trade then reaching a new record intraday high of 7910.5.

The materials sector is almost single handedly supporting the index with a 0.9 per cent rise after Singapore iron ore futures rose about 2.5 per cent to about $US102.50 a tonne on Monday. BHP is up 1.7 per cent.

However, US futures are down about 0.2 per cent so it may be hard for the ASX 200 to set a new record daily close unless iron ore prices rise further.

The energy sector is also higher with Santos up 0.8 per cent as WTI crude oil futures remain near an eight-month highs of $84.49 a barrel hit overnight.

Most other sectors are down but the heavyweight banks are flat.

12:15 pm April 2, 2024 Highlight

Mesoblast up 83pc over three days

Valerina Changarathil

Mesoblast's strong run of gains continues with the shares now up 83 per cent in just three trading sessions.

Shares are up 58 per cent to 87.5c at 12.10pm AEDT – 83 per cent higher than the 48c close on March 25. On March 26, biotech Mesoblast returned from a trading halt with news it was gearing up for a third attempt to secure US FDA approval for its lead product candidate.

The approval for its Ryoncil (remestemcel-L) product for the treatment of children with steroid-refractory acute graft versus host disease (SR-aGVHD) – a devastating and life-threatening complication of a bone marrow transplant – has been a key priority for chief executive Silviu Itescu for years.

A resubmission for its Biologics License Application will be filed in the current quarter, "seeking to address all remaining product characterization issues". Mesoblast raised $97m from investors in December to meet the regulator's request for more data – including a trial involving adults. That request came after the US FDA snubbed Mesoblast's second attempt for approval in August last year, which sent shares to an 18-year low.

12:02 pm April 2, 2024

Loan arrears to pick up: RBA

Matt Bell

The Reserve Bank of Australia says financial conditions in the country were "restrictive" and expected loan arrears to increase further in the coming months.

The central bank has lifted interest rates by 425 basis points since April 2022 to 4.35 per cent in November 2023 as it looked to return inflation to within its target band of 2-3 per cent by the end of 2025.

Minutes from its March meeting show that the tightening of monetary policy had led to a significant rise in household debt payments, weighing on disposable incomes and consumption. Scheduled household debt payments were expected to rise a little further in 2024 as additional fixed-rate loans rolled onto higher rates.

Housing credit growth remained low and payments into offset accounts had risen since mid-2023 with lower income and less-wealthy households the most affected.

"As a result, the average housing deposit had increased at a faster rate than housing prices, and newer borrowers had higher incomes and lower loan-to-income ratios relative to earlier cohorts," the RBA said. The RBA expected overall loan arrears to pick up further in the period ahead, but to remain low relative to history because of strong starting financial positions for Australian households and sound lending standards in recent years.

"Banks’ high capital levels, profitability and provisions left them well placed to absorb a deterioration in credit quality in the event of worse-than-expected macroeconomic conditions," it said.

11:50 am April 2, 2024

Inflation high but returning to target: RBA

Matt Bell

The Reserve Bank says inflation is gradually returning to target despite remaining high as the labour market moves towards conditions consistent with full employment.

Minutes from its March board meeting show that leaving the cash rate target unchanged was the best way to achieve its strategy of supporting a gradual return of inflation to target and the labour market to full employment.

March was the first time since April 2022 that the board had not considered lifting interest rates in another sign that the cash rate is unlikely to rise above its current 4.35 per cent level.

The RBA said members agreed that returning inflation to target remained its highest priority and that it would take some time before they could have sufficient confidence that this would occur within a reasonable timeframe.

"At the same time, members noted the importance of preserving as many of the gains in the labour market as possible. In light of this and their assessment of the economy, members agreed that it was appropriate to characterise the policy outlook as one in which it was difficult to either rule in or out future changes in the cash rate target," it said.

The RBA said that there still was a risk that inflation would take longer to return to target than expected, which could result in an upward shift in inflation expectations. This was likely to occur if aggregate demand continued to exceed supply for longer than anticipated, productivity growth did not increase sustainably or if services price inflation proved stickier than assumed in the forecasts.

11:41 am April 2, 2024 Highlight

RBA didn't consider rate hike

Matt Bell

Minutes from the latest Reserve Bank board meeting suggest that for the first time in nearly two years it did not actively consider lifting interest rates amid further signs that inflation continues to moderate.

The minutes of the RBA board meeting made no mention of plans to lift rates by 25 basis points in March, a stark contrast to its previous meeting in which it actively weighed up a rate hike.

This is the first time since April 2022 that the board has not considered an upward shift in rates. The RBA kept the cash rate on hold at 4.35 per cent after its March 18-19 meeting.

It comes as the RBA said that economic data has been broadly as expected, with it noting GDP growth was below both its historical trend and growth in the population. While it said inflation had moderated over prior months, it remained concerned about services inflation which remained high.

Members observed that financial conditions in Australia changed little overall since the previous meeting with household budgets restrictive and others finding it difficult to service their debts and meet essential expenses.

"In light of these assessments, members agreed that it was appropriate to leave the cash rate target unchanged at this meeting," the minutes read.

"They agreed that the data received since the previous meeting had been broadly as expected and did not materially alter the outlook for output growth and inflation."

11:34 am April 2, 2024

Orora dives on cloudy outlook

Valerina Changarathil

Packaging giant Orora is being punished for its earnings downgrade and a cloudier outlook for its recently-bought Saverglass acquisition.

Its share price is down 14.5 per cent to $2.33 at 11.30am AEDT.

The group earlier told investors ongoing market softness in demand for its glass products has led to a earnings downgrade to between $307m-$317m, excluding contributions from its Saverglass acquisition. Orora booked earnings of $320.5m in FY23.

Meanwhile, the group has also reduced sales forecasts for Saverglass after a weak performance in February and March with "no noticeable improvement" in forward customer demand as destocking is continuing.