ASX 200 breaks 7-day losing streak as RBA downplays recession worries

Highlights

• ASX 200 gained upward momentum after 7 days of losses as RBA wiped off recession fears.
• Australian mining giants were relieved as iron ore prices recovered some losses today.
• Top gainers were energy and financial sectors while healthcare lost the most.

ASX 200, the Australian benchmark, finally emerged out of its seven days of consecutive loss-making sessions today. The index gained 1.41% to finish at 6,523.80 and bounced back from its new 52-week low price level. Energy and material stocks rebounded from yesterday’s lows. To further cheer investors, Reserve Bank Governor Philip Lowe downplayed the chance of a 75-basis points interest rate hike.

What did RBA Governor say today?

Reserve Bank Governor Lowe told Australians to be prepared for further interest-rate hikes though emphasizing that the policy moves will be based on incoming economic data. He expects inflation accelerate to 7% in the last three months of the year and ease back by early 2023. As per Lowe, the level of interest rates was very low considering low unemployment and high inflation.

The governor’s outlook seemed to be based on global inflationary pressures, supply disruptions, Chinese lockdowns, and Russia’s Ukraine invasion

How were sectors and indices placed?

On the ASX 200 index, eight of eleven sectors ended higher today. Energy and financials gained 2.8% and 2.6%, followed by consumer staples which also ended in the green zone. The biggest loser was healthcare sector, down 0.92%.

The Volatility indicator- A-VIX was lower by 11.08% while All-Ordinaries index gained 1.38%. Large cap illustrative ASX 50 Index (XFL) rose 1.443% while Midcap index ASX Midcap 50 (XMD) shot up 1.505%. The ASX Small Ordinaries index (XSO) also closed 0.998% higher.

Top gainers and losers

^© 2022 Kalkine Media ®, Source- ASX website

Newsmakers of the day-

• Australian mining giants recovered yesterday’s losses while the outlook for steelmaking industry remained fragile. Rio Tinto (ASX:RIO) gained 2.27%, BHP Group (ASX:BHP) shares 1.71% and Fortescue Metals (ASX:FMG) share price jumped 3.47%.
• Meanwhile, based on a spike in Newcastle coal futures, Whitehaven Coal (ASX:WHC) share price rebounded 5.29%. Even Yancoal (ASX:YAL) gained 4.37% by market close.
• GrainCorp (ASX:GNC) reaffirmed its FY22 guidance. The company remains hopeful to deliver an EBITDA in the range of AU$590- AU$670 million in FY22. The food and staples retailer’s share price gained 4.95% by market close.
• On the losing end, ResApp Health (ASX:RAP) shares nosedived 28.57% after results of the Data Confirmation Study of its COVID-19 algorithm. Reportedly a ‘not so positive’ outcome dragged the share price down and also resulted in a drop in the scheme consideration from Pfizer.

On the global front-

European shares were predicted to extend yesterday’s gains as EUROSTOXX 50 futures was gaining. Even FTSE futures pegged high. Meanwhile, the European central bank President Christine Lagarde has reiterated intentions to deliver interest rate hikes in July and September.

In the US, while the Fed is taking inflation seriously, Chair Jerome Powell will testify to the House this week. The S&P 500 e-mini share futures were rising, and Nasdaq e-mini share futures were also seen advancing.

In Asia, China’s COVID-19 flare-ups remained a major influencer with new outbreaks in populated cities like Shenzhen. While China’s Shanghai Composite and Shenzhen Component slipped down, Hong Kong Hang Seng registered gains. Japan's benchmark Nikkei also rose alongside neighbour Korean KOSPI.

On the commodities front-

• Oil prices were higher due to tight supplies and concerns about a recession dampening demand. Brent crude futures rose alongside peer US West Texas Intermediate (WTI).
• The US is reportedly in talks with Canada and other global allies to further restrict Russian energy revenue. It is likely to impose a price cap on Russian oil while not impacting income countries.
• Australia, one of the world's biggest exporters of liquefied natural gas (LNG) and coal is facing a domestic energy supply shortage.
• In metals, copper continued its downward trail, gained slightly to tumble later due to Chinese demand slowdown fears.
• Yellow metal gold was down in Asia, thanks to an easing in US dollar. Investors seem concerned about interest rate hikes by major central banks globally. Meanwhile other precious metals, including silver, platinum and palladium rose.
• Bitcoin has failed to break strongly above or below the US$20,000 level in recent days.