ASX 200 down; Telstra gains; Insignia down; China inflation tepid; RBNZ holds rate; flat US lead after Powell remarks

Incitec's $900m buyback after Indonesian takeover fails. Insignia down after dismissing private equity interest speculation. China inflation tepid amid lacklustre demand. Reserve Bank of NZ holds cash rate, sees inflation back to target by December. 

Economic outlook commentary in relation to inflation and rates is underpinning recent equity investor sentiment. Picture: Nikki Short

Welcome to the Trading Day blog for Wednesday, July 10. The ASX 200 index is down 0.2 per cent to 7811.50 points at 4pm AEST, recovering from a deeper dive during the morning session. Wall Street closed largely flat after US Fed chair Jerome Powell inched closer to rate cuts.

The Aussie dollar is trading around US67.47c at 5.05pm AEST after China's CPI update and the RBNZ's rate decision.

Updates

4:54 pm July 10, 2024

ASX 200 ends down 0.2pc, resources weakest

David Rogers

Australia's share market ended slightly weaker as commodity price falls weigh.

The S&P/ASX 200 index closed down 0.2 per cent at 7816.8 points after dipping to 7782. Share trading value remained light amid NSW and VIC school holidays.

Helping market sentiment, the RBNZ was surprisingly dovish in its interest rate outlook even as it left its cash rate target unchanged as expected.

Six of 11 sectors rose with communications strongest as Telstra jumped 2.4 per cent to a three-month high close of $3.82 as Macquarie upgraded to Buy and investors scramble to increase their exposure after Tuesday's mobiles pricing announcement. JB Hi-Fi jumped 2.2 per cent on very heavy volume.

But the heavyweight materials sector fell along with energy and utilities as Singapore iron ore futures fell 2.8 per cent to $US106.35 a tonne and Brent crude oil futures hit a three-week low of $US84.13, down about 1.4 per cent in 24 hours.

Banks were mixed with ANZ up 1.4 per cent and Westpac down 0.6 per cent.

4:42 pm July 10, 2024

Platinum outflows hit $234m

Joseph Carbone

Platinum Asset Management reveals approximately $234m of net outflows in June 2024 through its investment arm.

Approximately $195m of the outflows came through Platinum Trust Funds. The outfit said the outflows do not include $218m redistributed to shareholders or the distribution reinvestment of $72m.

In the same announcement, the $600m-plus firm provided a market update, stating it had made "good progress" on managing cost, with FY24 costs estimated at around $21m.

The company's investment gains and other income items are expected to fall between $9m and $11m.

PTM shares closed Wednesday trading at $1.06 per share, up 0.5 per cent.

2:45 pm July 10, 2024

Telstra shares performing well post-hike

Joseph Carbone

Telstra shares are up 2.6 per cent to their highest point in 10 months, per Bloomberg.

The continued rise comes after the nation's biggest telecom announced plans to hike most pre-paid offers and plans by between $2 and $4 earlier this week.

Telstra's jump comes amid communication services shares performing best on Wednesday, far outpacing the other 10 sectors.

Other than Telstra, REA Group shares are up 0.6 per cent to $198.01 per share, with Spark New Zealand shares also rising to $3.70 per share, up 0.5 per cent.

TLS shares are currently trading at $3.83 per share.

2:19 pm July 10, 2024

RBNZ makes 'monumental dovish shift': IG

David Rogers

The RBNZ's decision to leave its cash rate unchanged at 5.5 per cent was widely expected but its accompanying statement saw a "monumental dovish shift".

“Restrictive monetary policy has significantly reduced consumer price inflation, with the Committee expecting headline inflation to return to within the 1 to 3 per cent target range in the second half of this year," the RBNZ statement said.

“Labour market pressures have eased, reflecting cautious hiring decisions by firms and an increased supply of labour.”

Moreover the the final paragraph contained dovish forward guidance which further opening the door for rate cuts before year-end, says IG's Tony Sycamore.

“The Committee agreed that monetary policy will need to remain restrictive," the RBNZ said. "The extent of this restraint will be tempered over time consistent with the expected decline in inflation pressures.”

Since the RBNZ’s last meeting in May, a 1Q2024 GDP print of 0.2 per cent confirmed subpar growth in the NZ economy after two quarters of negative growth.

Housing prices have continued to fall to be 25 per cent below their prior peak.

With key labour market and inflation data not due to be released until after the RBNZ’s next meeting on August 14th, the rates market is pricing in a full 25bp rate cut at the RBNZ’s meeting on October 9th. A second 25bp rate cut is almost fully priced by year-end, which would take the OCR back to 5.00 per cent.

After this significant shift in tone from the RBNZ, AUD/NZD has surged from 1.1000ish to 1.1080, its highest level in sixteen months.

The S&P/NZX 50 went from down 0.2 per cent to up 0.4 per cent.

12:41 pm July 10, 2024

APA dips after Senex deal

Colin Packham

APA Group's shares are 0.3 per cent lower at $7.79 in afternoon trading after it agreed to spend $20m to upgrade a pipeline in Queensland to transport new gas supplies from Senex's new $1bn expansion, after the two companies signed a 20-year agreement.

The deal will facilitate much-needed gas to Australia’s east coast as the region struggles with a looming catastrophic shortfall emerging as soon as 2026.

The country’s market operator has said emergency measures could be implemented by 2027 or 2028 when traditional gas supplies to the east coast are likely to be exhausted.

12:37 pm July 10, 2024 Highlight

RBNZ keeps rates on hold

Valerina Changarathil

New Zealand's central bank says its restrictive monetary policy has "significantly reduced" consumer price inflation, which it expects will return to within the 1 to 3 percent target range in the second half of this year.

However, Reserve Bank of NZ officials agreed to maintain the cash rate at 5.50 per cent with the extent of the monetary policy restraint to be "tempered over time consistent with the expected decline in inflation pressures".

Members noted a risk that domestically driven inflation could be more persistent in the near term. However, there is also a risk that price-setting behaviour and inflation expectations could normalise more rapidly as headline inflation declines.

11:50 am July 10, 2024 Highlight

Chinese inflation remains tepid

China’s consumer inflation remained tepid last month while factory-gate prices continued to fall, pointing to persistently lackluster demand despite Beijing’s efforts to juice up consumption.

The country’s consumer-price index rose for a fifth consecutive month in June, edging up 0.2 per cent from a year earlier, the National Bureau of Statistics said Wednesday. This missed the 0.4 per cent rise expected by economists in a Wall Street Journal poll and compared with May’s 0.3 per cent increase.

Meanwhile, factory-gate prices stayed in deflation but narrowed their decline from May. The producer-price index fell 0.8 per cent in June from a year earlier, marking a twenty-first-straight month of contraction. The WSJ poll had tipped a 0.7 per cent decline.

Wednesday’s figures came as no surprise for many economists, who expect inflation to stay low throughout the year as a drawn-out property slump continues to dent consumer confidence and spending. Beijing’s manufacturing drive also risks pushing prices down further, economists say.

– Dow Jones

11:27 am July 10, 2024

Wesfarmers valuation continues to look stretched: MS

David Rogers

Wesfarmers share market valuation "continues to look stretched" according to Morgan Stanley as it trims its earnings forecasts on lower lithium pricing estimates.

Updated lithium spodumene/hydroxide pricing expectations lead the broker to lower its lithium earnings contribution. It says weakening hardware data points highlight risks to the consensus estimate of 3.8 per cent growth in Bunnings sales.

Analyst Melinda Baxter warns of limited scope for earnings upgrades, a stretched valuation and ongoing pressure on the Australian consumer.

Ms Baxter downgraded to Underweight with a $56.20 price target on May 23rd.

Wesfarmers dived about 7 per cent to a three-month low of $63.06 afterwards.

A rebound peaked at $63.24, near the level where Morgan Stanley downgraded.

Wesfarmers shares were last down 1.8 per cent at $65.38.

10:57 am July 10, 2024

JB Hi-Fi up 1.6pc on good volume

David Rogers

JB Hi-Fi has been a standout so far Wednesday despite a lack of news.

Shares jump 1.8 per cent to a two-week high of $64.12 on volume about 35 per cent above the 20-day average for this time of day.

JB Hi-Fi jumps despite intraday falls in the ASX 200 and retail peers.

JBH last up 1.6 per cent at $64.01.

10:33 am July 10, 2024

ASX 200 down 0.5pc; materials weakest

David Rogers

Australia's share market retreats in quiet trading as light volumes continue to exaggerate price movements amid school holidays.

The S&P/ASX 200 index is down 0.5 per cent at 7790.4 after dipping to 7782.

Share trading value is about 45 per cent below average for this time of day.

All sectors except communications are down with materials weakest.

Telstra jumps as much as 2 per cent to a fresh three-month high of $3.80 as Macquarie upgrades.

BHP falls 1.1 per cent to a one-week low of $43.24.

CBA falls 1.1 per cent to $127.26 after hitting a record high of $128.97 Wednesday.

Incitec Pivot dives 4 per cent after ending talks to sell its Fertilisers business.