ASX 200 down; case for unchanged rates 'stronger': RBA minutes; TWU hails 'bittersweet' Bonza liquidation; Liontown's $379m Korean deal

RBA minutes show narrowing path to normal inflation. Liontown soars on Kathleen Valley funding, offtake deal with LG Energy. Union hails 'bittersweet' Bonza liquidation. 

Economy and rates are in focus with the release of RBA meeting minutes on Tuesday. Picture: Lisa Maree Williams/Getty Images

Welcome to the Trading Day blog for Tuesday, July 2. The ASX 200 index closed down 0.4 per cent to 7718.20 points as energy gains were offset by property falls.

The Aussie dollar is near US66.43c at 5.10pm AEST after the release of the RBA's June meeting minutes.

Updates

4:39 pm July 2, 2024

ASX 200 slips 0.4pc to two-week low

David Rogers

Australia's share market falls to its lowest daily close in two weeks after hawkish RBA minutes and overall negative US leads including some slippage in futures.

In a second consecutive daily fall at the start of the financial year the S&P/ASX 200 fell 0.4 per cent to 7718.2 points with all sectors except energy down.

The index hit a three-day low of 7702.5 after RBA minutes questioned whether policy was "sufficiently restrictive", S&P 500 futures fell 0.2 per cent after most sectors in the S&P 500 fell on Monday as bond yields rise as Trump's election chances improve.

Woodside rose 3.1 per cent after Brent crude oil rose 2 per cent to $US86.78 a barrel and Whitehaven Coal soared 5.7 per cent amid Anglo American's mine fire.

But Goodman Group dived 2.1 per cent, Wesfarmers fell 1.1 per cent, NAB lost 1.1 per cent and Rio Tinto and Fortescue both fell 0.9 per cent.

Woolworths fell 0.8 per cent as the Federal Opposition unveiled a unveiled a legislative crackdown to deter uncompetitive behaviour by major supermarkets.

3:46 pm July 2, 2024

Whitehaven hits 17-month high

Joseph Carbone

Whitehaven Coal has enjoyed a strong day on the market, rising 5.8 per cent to reach a 17-month high, continuing Monday's trend when it jumped 6.5 per cent.

Off the back of anticipated tight supply for coal and Anglo American's Grosvenor mine fire, coal miner Coronado is also up 3.6 per cent to $3.72 per share.

The rise in the $6.8bn Whitehaven comes despite a down day for the sector, currently 0.5 per cent in the red.

WHC shares last traded at $8.57 per share, up 5.4 per cent.

2:11 pm July 2, 2024

ASX 200 falls 0.6pc to 3-day low

David Rogers

Australia's S&P/ASX 200 share index falls 0.6 per cent to a three-day low of 7702.5 after hawkish RBA minutes and falls in US stock index futures.

The US futures falls may be having more of an impact than the minutes, given that Australian bond yields and the Aussie dollar saw no lasting impact.

Losses broaden to include all sectors except energy, with property weakest and materials and consumer discretionary also underperforming the index.

The index is back within striking distance of a rising support line from the April low, currently located at 7687. A dip below this line was well supported last week.

2:07 pm July 2, 2024 Highlight

Liontown's $379m Korean deal for Kathleen Valley

Valerina Changarathil

Lithium developer Liontown Resources has secured $US250m ($379m) in funding and a 10-year offtake deal extension for its Kathleen Valley project in WA from South Korean giant LG Energy.

The funding is via five-year convertible notes secured at a conversion price of $1.80 per share and a coupon equal to a reference rate of Secured Overnight Financing Rate (SOFR). If converted today, the notes would give LG Energy an 8 per cent stake in Liontown, which also counts mining billionaire Gina Rinehart as a key stakeholder after her on-market raid to scuttle a $6.6bn takeover by US giant Albemarle.

The deal increases Liontown's total cash balance to $501m, providing balance sheet strength to fund Kathleen Valley's ramp-up to its targeted 3 million tonnes per annum steady state production. First production is targeted for the end of this month. An existing 5-year LG Energy Solution offtake agreement is now extended to 15 years in total.

The two partners will also explore the feasibility of establishing a lithium refinery, which has the potential for long term value creation, Liontown told investors.

Managing director Tony Ottaviano said the funding will be instrumental in supporting the production ramp up to 3mtpa and early works necessary to preserve the potential 4mtpa expansion case for Kathleen Valley. "These developments pave the way for Liontown to pursue our long-term strategy to be a globally significant provider of battery minerals as the world transitions to a low-carbon future." LTR shares are 10 per cent higher at 98c shortly after the update.

1:28 pm July 2, 2024

All over for Bonza

Robyn Ironside

It's officially all over for Bonza after the airline's employees, customers and other creditors voted in favour of liquidating the purple-liveried low cost carrier.

The vote was taken at the second creditors meeting held by administrator Hall Chadwick with 35 votes in favour of liquidation, and six against.

It ends a miserable period for the airline's 323 workers, who will now be able to recover more than $10m in lost wages and leave entitlements through the federal government's fair entitlements guarantee scheme.

Operating mostly regional routes not flown by other airlines, Bonza had hoped to "democratise" travel by bringing low fares to rural Australia.

Investigations are continuing into whether Bonza was trading insolvent at the time of its collapse.

1:27 pm July 2, 2024

Most economists see RBA hold in August: Bloomberg

David Rogers

The RBA is expected to keep its cash rate target unchanged at its next policy meeting on Aug. 6, according to a Bloomberg survey conducted from June 28 to July 1.

Bloomberg says 15 out of 19 economists surveyed predicted a hold at 4.35 per cent, while 4 economists saw the rate being tightened to 4.6 per cent.

The RBA is expected to start cutting the rate to 4.1 per cent in the first quarter of 2025.

1:24 pm July 2, 2024

RBA minutes 'no smoking gun' for August hike: ANZ

David Rogers

ANZ sees "no smoking gun" in the RBA minutes to suggest a rate hike in August is the base case for the RBA, and continues to expect the cash rate to be on hold at 4.35 per cdent until the first 25bp cut in February 2025.

However, it sees "some risk that the next move is a hike" if Q2 CPI exceeds the RBA’s forecasts and the RBA’s economic growth expectations are revised up.

ANZ sees 3.9 per cent on-year for headline and 4.0 per cent for trimmed mean inflation, exceeding the RBA’s forecast of 3.8 per cent for both.

"It is difficult to discern from these minutes the extent to which that outcome would require a monetary policy response," says ANZ head of Australian economics, Adam Boyton.

"This likely reflects a desire by the Board to take full account of all available information, including the Q2 CPI data, the June labour force survey and the updated RBA staff forecasts."

1:07 pm July 2, 2024

RBA 'risks credibility' if it doesn't hike: Citi

David Rogers

Citi says stronger May CPI data has "elevated the triggers for a rate hike identified by the Board" at their June meeting, reinforcing its call for an August rate hike.

"It would now be difficult for the RBA Board to maintain the current cash rate after having these trigger conditions at least partially met by higher inflation data," says Citi Australia chief economist, Josh Williamson.

"Not raising rates risks policy credibility and would signal a dilution in importance of inflation, which would be unheralded."

"On balance, we expect the patient RBA Board will need to respond to the prospect of higher inflation for longer," Williamson adds.

"This comes from the threat of an elevation in inflation expectations as households respond to stickier prices."

He expects a 25bp hike in the cash rate to 4.6 per cent in August.

"This is the expected terminal cash rate this year, though risks are tilted towards another hike if inflation doesn’t behave according to the Bank," warns Citi's Williamson.

12:58 pm July 2, 2024 Highlight

Union hails 'bittersweet' Bonza liquidation

Valerina Changarathil

The Transport Workers Union says the yes vote by Bonza's creditors to liquidate the airline is the "bittersweet" news works have been waiting for.

The liquidation process triggers workers' access to the government’s Fair Entitlements Guarantee scheme.

Approximately 500 Bonza workers were terminated on June 11, but workers could not claim owed entitlements until the company entered liquidation, which has now occurred.

Workers are collectively owed an estimated $10.8m for entitlements such as wages, redundancy, and pay in lieu of notice after not being paid since March and including for work in April while administrators attempted to find a buyer.

12:55 pm July 2, 2024

ASX 200 fall deepens after RBA minutes

David Rogers

Australia's stock market extends its intraday fall on hawkish RBA minutes.

The S&P/ASX 200 trades at an intraday low of 7722.5, extending its fall from 0.1 per cent to 0.4 per cent after the minutes suggest the RBA Board spent more time discussing the case to hike rates, even though it ultimately left rates on hold.

This is reinforcing the risk of a rate hike after higher than expected June CPI data.

Falls broaden to include 7 of 11 sectors with property weakest amid upward pressure on bond yields in the US and Australia in recent days.

The materials sector surprisingly also underperforms despite iron ore gains.

Goodman Group falls 1.3 per cent and BHP falls 0.5 per cent.

Energy outperforms with Woodside up 2 per cent after Brent crude oil prices rose 2 per cent and Whitehaven up 3.4 per cent amid Anglo American's coal mine fire.