Closing Bell: ASX Hits New Record with Boost from Iron Ore Giants; RBA Rate Cut Unlikely Amidst Tight Job Market

Market Update: ASX Reaches Record Highs Amid Iron Ore Rally; RBA Rate Cut Unlikely as Job Market Remains Robust

The ASX200 achieved a new record high today, driven by a rally in mining stocks following the first interest rate reduction from the US Federal Reserve in over four years. The benchmark index increased by 0.6%, buoyed by a resurgence in iron ore prices. Major mining companies BHP (ASX:BHP), Fortescue Metals Group (ASX:FMG), and Rio Tinto (ASX:RIO) saw gains between 2% and 3% as a result.

Despite the upbeat local market sentiment, US traders displayed less enthusiasm. Major US indexes fell after Federal Reserve Chairman Jerome Powell cautioned against expecting more aggressive rate cuts. Powell stated, “I do not think that anyone should look at this and say, ‘Oh, this is the new pace.’” Additionally, only 10 of 19 Fed officials supported further 50 basis point cuts in upcoming meetings, contributing to market uncertainty.

The US dollar strengthened and Treasury yields fell following the Fed’s announcement, suggesting that investors anticipate future rate reductions may be more modest. The Fed's decision has nonetheless bolstered confidence in the US economy's ability to avoid a recession, which could have positive implications for stock markets in the near term. According to a Bloomberg survey, approximately 75% of professional forecasters believe the US will achieve a soft landing and avoid a technical recession by the end of next year.

In the Australian context, recent employment data indicates a tight job market, with the unemployment rate remaining at 4.2%. The Australian Bureau of Statistics reported a significant increase in job creation, with 47,500 jobs added last month, surpassing the anticipated 25,000. This robust job market may influence the Reserve Bank of Australia’s (RBA) stance on interest rates, with some experts suggesting that the RBA may refrain from reducing rates until 2025 to mitigate potential inflationary pressures.

In today's market movements, ALS Limited (ASX:ALQ), a testing company, experienced an 8.5% decline following a trading update that revealed challenges within its Minerals division. ALS reported decreased sales volumes and margin pressures, particularly in Australia and Latin America. Conversely, Monadelphous Group (ASX:MND) saw a 2% increase in share value after announcing several new contracts worth approximately $230 million, including a construction contract for a urea plant and maintenance contracts with South32 (ASX:S32) and BHP for its Prominent Hill Expansion Project.

Regionally, Asian markets mostly rose, with Japan leading the gains. Singaporean stocks are poised for their best close since 2007. The Hong Kong Monetary Authority reduced its base rate for the first time since 2020, while New Zealand reported a contraction in its economy for the second quarter. The Bank of England is anticipated to maintain its current rate levels when it announces its decision tonight.

In commodities, gold prices experienced a slight increase following a volatile session, while oil prices remained stable as investors balanced weak US demand with geopolitical uncertainties.

Small Cap Highlights

GreenTech Metals (ASX:GRE) reported promising results from drilling at its Whundo Copper Project, showing high-grade copper results and potential for resource expansion. Bindi Metals (ASX:BIM) acquired two antimony projects in Serbia, which could benefit from Europe's recent supply chain concerns. Javelin Minerals (ASX:JAV) is preparing to drill at the Coogee Gold-Copper Project, aiming to extend known mineralization. Miramar Resources (ASX:M2R) saw an increase in stock value, with ongoing exploration work generating interest. Copper Search (ASX:CUS) has reported mixed results from its drilling efforts, with further exploration anticipated.

Overall, the Australian market is navigating through a mix of domestic and international influences, with mining stocks leading the charge and a robust job market shaping expectations for future monetary policy.