ASX 200 rises before RBA decision; CBA hits intraday high; Fortescue, Beach down

RBA leaves rates on hold. Eagers Automotive director ends hiatus. City Chic halts as Blundy interest grows. Beach targets more cuts. CBA hits intraday high after Regal's short reveal. Fortescue block trade weighs.

Multiple central bank Interest rate decisions and economic commentary are in focus this week. Picture: Nikki Short

Welcome to the Trading Day blog for Tuesday, June 18. The ASX 200 index closed 1 per cent higher at 7778.10 points, with all sectors in the green. The RBA announced it would hold interest rates steady.

The Aussie dollar is trading around US66.22c at 4.15pm AEST after the RBA's decision.

Updates

4:26 pm June 18, 2024

ASX 200 up 1pc; best rise in 5 weeks

David Rogers

Australia's stock market scores its best one-day rise in almost five weeks.

After hitting a two-week low at the start of the week, the S&P/ASX 200 ends up 1 per cent to 7778.1 points after hitting a five-day high of 7780.3.

The biggest one-day rise since May 16th and the highest daily close in the past six trading days comes as Tesla, Microsoft and Apple drive a 0.8 per cent rise in the S&P 500, European equities rebounds from French political jitters, and Singapore iron ore futures rise 2.9 per cent to $US108.35 a tonne.

The RBA delivered a "hawkish hold" on rates as expected by economists.

Broad gains were led by utilities, financials, industrials and health care.

CBA rose 2 per cent to a record high close of $127.98 as hedge fund manager Phil King highlighted the fact that Regal Funds remains short CBA.

Macquarie jumped 2.6 per cent amid a positive note from Morgan Stanley.

Origin Energy jumped 3.5 per cent as oil prices rose 2.3 per cent.

Fortescue dived 5.2 per cent as an investor sold in a large block trade.

Beach Energy fell 2.2 per cent on disappointing production guidance.

3:57 pm June 18, 2024

Demand is still a bit too strong: Bullock

David Rogers

RBA Governor Bullock says in her post meeting press conference that inflation data are indicating that domestic demand is "still a bit too strong."

She agrees there are "distributional issues" but says "monetary policy can't do anything about that…you can only focus on bringing aggregate demand down."

She's also less concerned about recession risk now.

"I think the world economy we think actually probably has troughed now… we think that that it won't actually go down further," Bullock says.

"This is the point of the narrow path is trying to avoid a recession here and that's still our aim.

"The aim is…bring inflation down and try and maintain as many of the gains in employment as we've had over the past year or so as we can and keep employment growing to the extent we can. That's not a recession.

"There are some risks on the downside, so we've got to be really alert to them, and if they look like they're materializing, then that's when we have to think about whether or not we need to loosen monetary policy."

3:48 pm June 18, 2024

RBA board didn't discuss rate cut: Bullock

David Rogers

RBA Governor Bullock says the RBA board didn't discuss the case for a rate cut in its June board meeting.

"So no the case for a cut was not considered," Ms Bullock says in her post meeting press conference.

"We're not ruling anything in or anything out at the moment."

She also says she "wouldn't say that the case for a rate rise is increasing."

"What I would say and I think we've tried to reflect this in the statement is that there's been a few things that have made the board alert to the upside risks, so I wouldn't say it's increasing," Bullock adds.

"I think that that reflects the fact that if it looks like inflation is not coming sustainably back in the band, within a reasonable amount of time, that just increases the risks, that inflation expectations will adjust, and that will make it harder to get inflation down in the future."

3:44 pm June 18, 2024

June CPI important for RBA outlook

David Rogers

Asked how many inflation reports the RBA needs to see before considering cutting interest rates, RBA Governor Bullock says the CPI for the June quarter is "going to be important in looking at how the trajectory for inflation."

"The challenge for us, which is almost unique to us…we only have quarterly CPI (so) it's very difficult to get a read on momentum," Bullock says in her post meeting press conference.

"So yes, the CPI will be important for the June quarter, but we're going to have to look at other things as well.

"We're going to have to look at the unemployment situation the employment data, the suite of employment indicators that we have, which you see now in the statement on monetary policy.

"So I wouldn't say there's a particular number of times we need to look at CPIs…we're going to be looking at all sorts of data coming through.

"But the June CPI is going to be an important one because it's going to give us a much more comprehensive view of what's going on."

3:39 pm June 18, 2024

RBA discussed case for a rate hike

David Rogers

The RBA board again discussed the case for a rate hike at its June meeting.

"So yes, the Board did discuss the case for increasing interest rates at this meeting," Mrs Bullock says in her press conference.

"In the end, it decided that its current strategy of staying the course and trying to bring inflation back down by bringing supply back to demand was the right way to go." She says the pace of consumption is on the boards' "list".

"You can think about the national accounts in a couple of ways," Bullock says. "One is that people are saving less to support their consumption because they're very confident about the future.

"The other way you can interpret it is that people are really hurting and they're not saving as much and they're really struggling to make ends meet.

"In which case that doesn't bode so well for consumption."

3:34 pm June 18, 2024

Policy at a 'complex part of the cycle': RBA's Bullock

David Rogers

RBA Governor Bullock says the RBA is at a "really complex past of the cycle."

"As I've said before, we're looking to bring inflation down to target while maintaining the gains in the labour market that we've seen over the past couple of years," she says at the start of her press conference.

"Inflation is still above central bank targets in many economies, and it is proving to be sticky, and the progress in getting inflation down has slowed.

She notes that March quarter consumption data, and upward revisions to his history mean that consumption growth has been a bit stronger than we thought and the savings rate a bit lower.

"At the same time, I think you'll all remember that GDP barely grew in the quarter, and consumption per capita continued to decline," she says.

"We do expect that household real incomes will rise later in the year with tax cuts and lower inflation. So it is possible that consumption growth will also be a bit stronger."

But we also know that many households are really feeling the impacts of high inflation and higher interest rates. And as I noted earlier, on average, households have reduced this saving rate by more than we thought to support their spending."

2:51 pm June 18, 2024

RBA warns on policy lags, overseas uncertainty

David Rogers

The RBA remains unsure of the "lags in the effect of monetary policy" and how firms’ pricing decisions and wages will respond to "slower economic growth at a time of excess demand, and while the labour market remains tight."

It also notes again the "high level of uncertainty about the overseas outlook."

“Output growth in most advanced economies appears to have troughed,” the Board says. “There has been improvement in the outlook for the Chinese and US economies, and many commodity prices have picked up.

“Some central banks have eased policy, although they remain alert to the risk of persistent inflation. Nevertheless, geopolitical uncertainties, including those related to the conflicts in the Middle East and Ukraine, remain elevated, which may have implications for supply chains.”

2:44 pm June 18, 2024

Inflation falling more slowly than expected: RBA

David Rogers

After another month of higher than expected inflation data, the RBA board repeats the gist of its hawkish observation on the disappointing pace of disinflation.

“Inflation is easing but has been doing so more slowly than previously expected and it remains high,” the RBA Board said after its meeting. “The Board expects that it will be some time yet before inflation is sustainably in the target range.”

RBA forecasts last month predicted inflation would not reach the mid-point of its 2-3 per cent target band until mid-2026.

While repeating that higher interest rates have been “working to bring aggregate demand and supply somewhat closer towards balance”, the Board continues to warn of “continuing excess demand in the economy, coupled with strong domestic cost pressures, both for labour and non-labour inputs.”

“Conditions in the labour market have eased further over the past year, but remain tighter than is consistent with sustained full employment and inflation at target,” the Board said.

“Wages growth appears to have peaked but is still above the level that can be sustained given trend productivity growth.”

It comes after the nation’s unemployment rate hovered around 4 per cent in recent months, in line with the RBA’s latest forecast for the June quarter below its estimate of the so-called non-accelerating inflation rate of unemployment or NAIRU, which it recently pegged at 4.3 per cent.

But Australia’s wage cost index for the March quarter rose 4.1 per cent year-on-year below the market consensus estimate of 4.2 per cent. Economic growth was a lower than expected 1.1 per cent, the weakest growth apart from the Covid-19 pandemic period since the early 1990’s recession.

The board also notes that recent data revisions suggest consumption over the past year was stronger than previously suggested, but “output growth has been subdued, and consumption per capita has been declining, as households restrain their discretionary expenditure and inflation weighs on real incomes.”

The RBA also repeats its warning of uncertainties regarding the lags in the effect of monetary policy and how firms’ pricing decisions and wages will respond to the slower growth in the economy at a time of excess demand, and while the labour market remains tight.

2:31 pm June 18, 2024

RBA keeps rates on hold as expected

David Rogers

The Reserve Bank kept interest rates on hold as expected after its meeting but repeated its warning that disinflation is taking longer than expected despite a risk of sustained economic weakness causing a “noticeable deterioration" in the labour market.

While remaining equivocal on the interest rate outlook, the central bank again said it will stay “vigilant to upside risks” on inflation, even as it saw a “risk that household consumption picks up more slowly than expected.”

“The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out,” the RBA Board said.

“The Board will rely upon the data and the evolving assessment of risks.
“In doing so, it will continue to pay close attention to developments in the global economy, trends in domestic demand, and the outlook for inflation and the labour market.

“The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome.”

2:12 pm June 18, 2024 Highlight

Eagers' Birrell ends buy-in hiatus

Valerina Changarathil

Eagers Automotive's long-time director Marcus Birrell has moved to shore up his stake in the group eight years after selling his Birrell Motors Group to the ASX-listed entity.

A change of director's interest notice on Tuesday afternoon shows Mr Birrell bought 200,000 shares for $2.1m – across 11 on-market transactions, all on Monday.

His first buy-in since July 2016 takes his shareholding in the business now to 2.2 million shares. Eagers completed its purchase of Birrell Motors – announced in November 2015 – in March 2016.

Close to 2pm AEST, Eagers' share price is up 1.4 per cent to $10.26 – but it's down 16 per cent since the $12.19 close on May 21, a day before the auto dealership group flagged a first-half profit warning "with a cautious lens on consumer sentiment".

The dip has also seen other directors, including billionaire Nick Politis, increase their stakeholding. Mr Politis – the biggest shareholder in Eagers Automotive via his WFM Motors Pty Ltd and NGP Investments businesses – has tipped in $4.5m since May 22 to lift his stake by 420,000 shares to 72.9 million shares.