ASX 200 rises; Nine board meets; CBA hits intraday record; Hanwha, Austal dispute; first ECB rate cut since 2019

CBA hits all-time high. Nine board meets over Costello fracas. Hanwha, Austal in break fee dispute. Life360 falls after US IPO. RBA deputy governor speaks at Aus Economic Outlook lunch.

Economic signalling is driving investor sentiment this week. Picture: Nikki Short

Welcome to the Trading Day blog for Friday, June 7. The ASX 200 index closed 0.5 per cent higher at 7860 points on consumer gains. ECB's first rate cut since 2019.

The Aussie dollar is near US66.75c.

Updates

4:25 pm June 7, 2024 Highlight

ASX rises to two-week high

Joseph Carbone

Australia's share market rises to a two-week high on light volume before US jobs data and long weekend holidays in NSW and Victoria, helped by rebounding commodities and optimism about the outlook for interest rates globally.

The S&P/ASX 200 index rises 0.5 per cent to a two-week high of 7860 points. The index is close to the record high of 7910.5 set in early April.

Ten of 11 sectors finish green, led by a 1.2 per cent rise in consumer discretionary stocks and a 0.8 per cent rise in the mining sector.

On consumer discretionary, Wesfarmers rises 1.3 per cent to $67.14 per share and Aristocrat jumps 1.9 per cent to $47.18 per share.

Iron ore miners lead a rebound in the materials sector with BHP up 1.1 per cent to $44.53 per share, with Fortescue rising 1.3 per cent to $24.37 per share.

Tech was the only sector marginally in the red, to finish a big week for the sector, down 0.1 per cent.

On the major banks, CBA hit its all time high, closing 0.6 per cent higher to $125.55 per share. NAB finished up 0.7 per cent to $35.23 per share. ANZ was 0.4 per cent higher at market close to $29.18. Westpac finished flat to $26.97 per share.

2:55 pm June 7, 2024

Sharp deflation worse than inflation: RBA

David Rogers

RBA deputy governor Hauser says deflation is more costly than inflation.

He tells Australian Economic Outlook that central banks have learnt from the "Volker era" that an excessive focus on lowering inflation by raising interest rates risks causing deflation, which does more damage than inflation.

"I think we've learned since then, and most if not all, central bank mandates include the idea that if you do the kind of thing you describe and really go macho (on interest rates), you are going to bring inflation down for sure," Hauser says. "But you're going to keep bringing inflation down to zero. to negative.

"There's one thing more costly than inflation, and that's sharp deflation.

"And so your kind of strategy on a hypothetical strategy you describe is not as clear and sensible strategy for any central bank to do because you'll bring inflation to target and then you'll keep going."

2:45 pm June 7, 2024

Australian economy not 'out of sequence': RBA

David Rogers

RBA deputy governor Andrew Hauser tells Australia's Economic Outlook that the Australian economy is not "out of sequence" with other countries after interest rate cuts by the BoC and ECB this week.

"I don't think so…their interest rates were higher than ours," Mr Hauser says.

"Their inflation rate is lower than ours, and their unemployment rate has picked up quite a bit more substantially than ours.

"I think if you took those data out of Canada and you plugged them into the Australian context, you might well see a different policy stance.

"So Canada is in a different place in terms of the economic development, and they've made the decisions that are right for them.

"In Europe, which obviously I've been a bit closer to in recent years, there has been a very persistent lack of growth.

"Now you might say, Australia has lacked growth in the most recent period. But actually, if you compare the aggregate growth rates in Australia to the aggregate growth rates in continental Europe, Australia…has had a pretty positive story to tell relative to Europe.

"You would much rather I think, be a living in Australia than you would in some parts of continental Europe at the moment."

He notes that the ECB revised up its inflation forecasts for the medium term while they cut interest rates, saying: "that's probably a bit of a communication challenge for them."

2:44 pm June 7, 2024

PM defends renewables roll-out

Perry Williams

Anthony Albanese defends the pace of rolling out large scale solar and wind amid fears Australia will miss its target of more than doubling renewable supplies by 2030.

The Prime Minister said big infrastructure projects did not move in a linear fashion, arguing the nation would catch up lost ground this decade.

"One of the things that happens with any infrastructure project — I know a bit about infrastructure — is it doesn't go in a straight line. It ramps up," Mr Albanese told Australia's Economic Outlook event in Sydney on Friday.

"And that is one of the things that you will continue to see that's what happens. That's just what any modeling will show you."

Mr Albanese said he disputed figures saying Australia was only adding 3.5GW a year of renewable energy to the power grid compared with a required 6GW annual target.

"I don't accept the figures that you've put forward," he told the event, co-hosted by The Australian and Sky News.

The Prime Minister also criticised the prior Coalition government for failing to add enough electricity supplies when coal power plants were closing.

"Not a single hole was dug on a new coal fired power station. That meant a delay in action and rollout of what was needed for the energy grid."

2:10 pm June 7, 2024

Australian inflation gets more 'sticky': UBS

David Rogers

UBS sees a "stickier" outlook for inflation in Australia but continues to expect the RBA to start cutting rates in February amid cuts by global central banks.

After bigger than expected subsidies in recent state and federal budgets, a lower-than-expected minimum and award wage increase, and a higher than expected monthly CPI indicator, UBS has revised down its headline CPI forecast for 2024 but increased its forecast for 2025.

The Swiss bank has also boosted its forecasts for trimmed mean inflation to 3.5 per cent from 3.3 per cent for 4Q 2024 – slightly above the RBA's recent forecast of 3.4 per cent. It has also increased its 4Q 2025 inflation forecast to 3.1 per cent from 2.9 per cent, versus 2.8 per cent forecast by the RBA.

"This keeps inflation stuck around the top of the RBA's target band for another two years," says UBS Australia chief economist, George Tharenou.

Tharenou says the sticky inflation outlook reflects: weak labour productivity, and elevated wage rates, especially regulated awards/public wages; material fiscal stimulus; booming migration, keeping housing inflation elevated; only partial extension of subsidies beyond 2024; and broader financial conditions which are "arguably only neutral, amid rising asset prices."

He says the RBA is unlikely to react by hiking the cash rate, but sees a risk of a longer-than-expected peak. The RBA has flagged lingering risk of another rate hike, but UBS sees less chance of a hike after lower than expected economic growth and a smaller than expected wage increase this week.

"Given the RBA did not hike in May-24, after lifting their forecasts materially, UBS doesn't expect the RBA to subsequently react to the stickier CPI outlook, especially for trimmed mean CPI, by hiking rates," Tharenou says.

For the RBA to hike again, he says it would probably need to see 2Q CPI rise 1 per cent or more on-quarter, plus a surprisingly strong labour market.

And while his new CPI outlook implies an upside risk that the RBA's cash rate will be held higher-for-longer than he expects, Tharenou says rate cuts by offshore central banks and a rise in the unemployment rate to "full-employment" estimates around 4.5 per cent will lead the RBA to cut.

While markets aren't fully pricing a first rate cut by the RBA until mid-2025, UBS expects it to start cutting in February, lowering the cash rate from 4.35 per cent to 3.35 per cent by the end of 2025.

1:29 pm June 7, 2024

We must fight inflation 'our way': PM

PM Anthony Albanese says Australia must fight inflation "our way" and "play to our strengths" rather than mimicking other nations.

The Prime Minister emphasised in his keynote address at the Australian Economic Outlook on Friday that the government is getting inflation down "not in spite of the help we are providing with the cost of living, but because of it".

Australia is not looking to go “dollar for dollar” with the US Inflation Reduction Act, or mimic the approaches of the European Union, Japan, or the Republic of Korea.

"We can’t rely on sheer weight of numbers – we have to be smart and strategic and play to our strengths,” he said. "Because while nearly every nation is currently seeking greater economic resilience for itself, for most, this is more about diversifying their supply chains rather than becoming entirely self-reliant."

The Future Made in Australia plan is set to ensure Australia is “no longer the last link in the global supply chain”, as well as ensuring Australia is a “renewable energy superpower”, he said.

– Clareese Packer

1:22 pm June 7, 2024

CBA hits new all-time high

Valerina Changarathil

Banking giant CBA has hit an all-time intraday high of $125.14 in the afternoon session and is tracking gains near $124.93 at 1.15pm AEST.

It comes after it spent most of the morning session in the red alongside its other three banking peers. Currently NAB is flat near $35.01 in the green.

ANZ is still toeing the red line near $29.03. Westpac's the clear laggard on Friday, down 0.7 per cent to $26.79.

1:15 pm June 7, 2024

ASX 200 up 0.4pc on light volume

David Rogers

Australia's share market extends its intraday rise on light volume before US non-farm payrolls data on Friday and a long weekend in VIC and NSW.

The S&P/ASX 200 index rises 0.4 per cent to a two-week high of 7856.3 points, but the total value of trades is about 26 per cent below average.

The index is just 0.7 per cent from a record high of 7910.5 set in early April.

A 2 per cent rise this week is the best in almost six months.

Gains broaden to include all sectors except the tech sector where Life360 is down 5.7 per cent after its US IPO and bigger tech stocks are down slightly.

Consumer discretionary takes the lead with Wesfarmers up 1.5 per cent and Aristocrat up 1.9 per cent.

Iron ore miners lead a rebound in the materials sector with BHP up 1.1 per cent, while banks are mixed and CBA has stalled after hitting a record high.

12:57 pm June 7, 2024 Highlight

Nine board meets over Costello fracas

James Madden

Sophie Elsworth

The seven-person board of Nine Entertainment is meeting on Friday, less than 24 hours after its chairman Peter Costello’s physical altercation with a journalist from The Australian at Canberra Airport.

It’s understood the incident involving Mr Costello and reporter Liam Mendes is high on the board agenda, given that the clash was front page news in most major mastheads across the country on Friday, and was extensively discussed on morning television and radio shows.

Some insiders at Nine are privately questioning whether Mr Costello can retain his position at the top of the media company, with one telling The Australian on Friday morning: “It’s untenable for him to continue as chair”.

At 1pm AEST, Nine Entertainment's share price is down 1.6 per cent to $1.41.

12:54 pm June 7, 2024

Social, economic challenges 'bearing down'

Sky News chief executive Paul Whittaker says Australia is facing several social and economic challenges, including the funding of the NDIS, inflation, and future defence priorities.

“These forces and more are bearing down on our economy and it will be how the government responds to these issues that will determine the nation's wellbeing for decades to come,” Mr Whittaker says in his opening address at Australia’s Economic Outlook event in Sydney.

“The economic headwinds are indisputably significant in testing the fiscal fortitude of the Prime Minister and his government,” he said.

– Clareese Packer