ASX 200 falls on CPI blowout; IAG sued; BHP-Anglo talks deadline; Fisher & Paykel profit down; Fonterra interest grows

April inflation higher than expected. BHP makes case to continue Anglo American takeover talks. IAG sued for alleged deceptive conduct. Fortescue down on Jarden rating. MA Financial narrowly avoids first strike.

Investors on alert for economic, corporate updates. Picture: Gaye Gerard

Welcome to the Trading Day blog for Wednesday, May 29. The ASX 200 index closed down 1.3 per cent to 7665.60 points after hotter-than-expected inflation data left all sectors in the red.

The Aussie dollar is trading around US66.50c.

Updates

4:54 pm May 29, 2024

ASX 200 drops 1.3pc on CPI blowout

David Rogers

Australia's share market dropped to its lowest level in almost four weeks as higher than expected inflation data reignited interest rate worries.

The S&P/ASX 200 closed down 1.3 per cent at 7765.6 after hitting 7660.9.

After falling 0.9 per cent after a jump in US bond yields, the S&P/ASX 200 fell further after the monthly CPI indicator rose 3.6 per cent on-year versus 3.4 per cent expected, wth the trimmed mean rising to 4.1 per cent.

:Rising global yields are putting weight back on equity valuations, which is putting pressure on indices in the Asian region," said Capital.com senior financial market analyst, Kyle Rodda.

"The rise in yields is partly a function of higher implied volatility in the Treasury market, driven by uncertainty stemming from several reads on US and global inflation in the coming days."

The consumer staples, industrials, financials and consumer discretionary sectors led broad-based falls, with Coles down 2 per cent, Transurban down 1.5 per cent, ANZ down 2.5 per cent and Aristocrat down 3 per cent.

On the charts, the index triggered a Head & Shoulders Top pattern targeting 7540 while it it remains below 7720.

The Head & Shoulders top also indicates that a bigger Double Top pattern is getting underway, with a fall to about 7080 possible on a break of 7493.

4:38 pm May 29, 2024

Judge unloads on Qantas

Robyn Ironside

In a lively final hearing to determine compensation for affected workers, Federal Court judge Michael Lee said Qantas “reverse engineered” its controversial outsourcing decision.

The outsourcing of 1683 ground handling workers at the height of the Covid-19 pandemic was in 2021 found to be unlawful by Justice Lee, after the Transport Workers Union successfully argued Qantas was motivated by a desire to avoid industrial action.

Qantas appealed against the decision to the Full Federal Court and the High Court, but the original ruling was upheld. The airline and union were then ordered into mediation to determine compensation for the affected workers but the talks failed, so the matter returned to the Federal Court.

As Qantas barrister Richard Dalton KC made his final submissions on the “inevitable” outsourcing, Justice Lee said there was a “high degree of artificiality” about the decision reached in 2020.

“It’s all very carefully done but the fact is it seems to me Qantas was intent on doing everything it could, irrespective of how it affected employees, and if it meant getting rid of them it was going to get rid of them,” Justice Lee said.

“If one looks at the entire suite of communications, this is all reverse engineered (by Qantas).

4:09 pm May 29, 2024 Highlight

BHP to Anglo: continue negotiations

Nick Evans

BHP calls on Anglo American to extend negotiations between the pair over a blockbuster takeover, in a new sign the mining giant believes Anglo is not serious about ongoing talks.

BHP put out a statement to the Australian market Wednesday afternoon saying it had genuinely tried to address Anglo’s concerns about its deal structure, which would require Anglo to shed its South African platinum and iron ore interests ahead of any broader deal, including the offer of a “reverse break fee” to allay concerns within the Anglo board at the risks of the transaction falling on its own shareholders.

Anglo has until the close of the UK market overnight on Wednesday to seek an extension of the talks with the UK takeovers panel, and has not yet publicly indicated whether it will do so.

But, BHP pre-empted any decision on the matter by Anglo on the Australian market, calling on its smaller rival to keep talking about the potential combination.

“BHP believes that the proposed measures it has put forward provide substantial risk protection for Anglo American shareholders and supplement the significant value uplift that Anglo American shareholders will receive from the potential combination,” the company said.

“BHP believes a further extension of the deadline is required to allow for further engagement on its proposal.”

2:30 pm May 29, 2024

Rio harassment class action could be on the cards

Joseph Carbone

Shine Lawyers is considering a possible class action against Rio Tinto on behalf of workers who may have experienced sexual harassment or sexual discrimination while working at mines.

The possible class action comes after a February 2022 report found women working for Rio Tinto had experienced bullying and discrimination based on their sex.

Shine's class actions practice leader Sarah Thomson said: "the investigation aims to determine whether Rio Tinto and/or its related subsidiaries failed to take adequate steps to eliminate discrimination and sexual harassment for employees as far as possible in its workplaces, and whether they are liable.

"We do not live in a world that tolerates sexual abuse and harassment in any workplace. Women have spoken out about instances of sexual abuse and assault and ultimately being driven out of the industry for speaking out. We cannot let any employer get away with this conduct without consequence."

At 2.30pm Wednesday Rio shares were down 1.7 per cent to $129.45 per share.

2:12 pm May 29, 2024

ASIC disqualifies NSW director

Joseph Carbone

The Australian Securities and Investments Commission announces the disqualification of Andrew Liam Parry from managing companies for five years.

The decision comes after Mr Parry, in a period spanning nine years, was a director or officer of four companies which went under.

ASIC investigations found Mr Parry failed to maintain company books correctly and with one company, On Solar, failed to prevent insolvent trading and failed to assist the liquidator of On Solar.

The four companies in question owe a total of more than $11m combined.

Mr Parry's disqualification runs until 24 May 2029.

1:59 pm May 29, 2024

ASX 200 falls 1.4pc; US futures slip

David Rogers

Australia's S&P/ASX 200 share index extends its intraday fall to 1.4 per cent, hitting a near four-week low of 7660.9.

On top of higher than expected inflation data damping hopes of rate cuts, S&P 500 futures are down 0.3 per cent, hinting at US falls on Wednesday.

The ASX 200 is currently heading for its worst day in the past few weeks.

1:38 pm May 29, 2024 Highlight

MA Financial's narrow miss on first strike

Valerina Changarathil

Listed asset manager MA Financial Group has narrowly avoided a first strike against its executive remuneration report at the annual general meeting on Thursday.

The resolution was carried, but after 23.67 per cent of the votes were cast against it – just short of the 25 per cent needed to deem it a first strike. About 28.07 per cent of the proxy votes ahead of the meeting were against the resolution.

Before the vote, chairman Jeffrey Browne blamed industry-wide related factors such as depressed corporate advisory activity and weak investment markets for a 32 per cent decline in the group earnings per share in FY23.

He also stressed remuneration outcomes for senior executives were lower in 2023, reflecting the weaker earnings performance. "However, the board also pays attention to strategic progress and platform growth when determining executive remuneration outcomes, as we wish to encourage decision making that delivers strong and consistent earnings growth over the medium to longer term."

1:04 pm May 29, 2024

'Simmering risk' of rate rise: Betashares

Valerina Changarathil

Australia's lingering inflationary pressures appear to largely reflect cost-push factors in housing, insurance and energy, which interest rates can’t really contain, according to Betashares Capital chief economist David Bassanese.

The RBA will be particularly worried the disinflationary process appears to have stalled out so far this year after encouraging declines over 2023.

"There's a simmering risk that the RBA may feel obligated to raise rates further to reduce inflation in those demand-sensitive areas it can influence (such as discretionay consumer goods and services) to offset the inflationary pressures in non-interest rate sensitive areas," Mr Bassanese's note states.

He now expects one rate cut at the end of the year, not two as anticipated before Wednesday's inflation print. "What's more there's at least a 30-40 per cent chance that the RBA could raise rates in coming months if the disinflationary process fails to resume anytime."

12:33 pm May 29, 2024

Inflation outlook 'murkier': Moody's

Valerina Changarathil

A second straight month where inflation has moved in the wrong direction is a "worrying development" with Australia's price outlook getting murkier, Moody's Analytics' chief economist Harry Murphy Cruise says.

Inflation ticked up again in April, rising to 3.6 per cent for the 12 months to April, up from 3.5 per cent in March and beating consensus expectations for it to dip to 3.4 per cent.

Inflation is also "digging in its heels" at the same time the government is ramping up spending to bring it down faster. The impact of the promised energy rebates on underlying inflation is still unknown. "It will all depend on how much of the energy rebates get spent, and how much gets squirreled away into savings," Mr Murphy Cruise says. "If it’s spent, it would add to demand at the exact same time the RBA is trying to take it out, adding to underlying inflation even if the headline figure comes down."

And then there's the stage 3 tax cuts and wage rises coming in. "All that will ensure the RBA stays put for a little longer; its next move will be down—but we'll have to wait a little longer… We see rates staying where they are until December when a 25 basis point cut will take the cash rate to 4.1 per cent."

12:04 pm May 29, 2024

Inflation rise may delay rate cuts

David Rogers

Capital Economics head of APAC Marcel Thieliant says stalling inflation means rates will stay high for longer but he doubts that the RBA will hike.

Headline inflation rose 3.6 per cent versus 3.4 per cent expected but "more worrying" was a second consecutive rise rise the trimmed mean trimmed mean, from 4.0 per cent to 4.1 per cent, Mr Thieliant says.

"Inflation excluding volatile items and travel held steady at 4.1 per cent, which suggests that the disinflation process is stalling," he warns.

"However, it’s worth noting that the trimmed mean measure in the Monthly CPI Indicator lags the quarterly measure that is more closely watched by the RBA, not least because some items whose prices are updated annually are treated differently across the two measures.

"What’s more, the RBA had already anticipated a pick-up in headline inflation from 3.6 to 3.8 per cent at its meeting earlier this month, though it predicted a further fall in trimmed mean inflation."

He notes that business surveys suggest that trimmed mean inflation will indeed continue to moderate rapidly over coming months.

"Even if that decline doesn’t happen, we doubt that this will prompt the RBA to hike rates yet again given that consumption growth is very weak, wage growth is slowing more rapidly than the Bank had anticipated, and the unemployment rate is close to the RBA’s measure of full employment," Thieliant adds.

"Either way, we’re sticking to our forecast that the Bank won’t start to ease policy until next year."