ASX ends up on miners; $A rises on RBA rate bets

The Australian sharemarket climbed on Wednesday as investors piled into heavyweight mining and banking stocks, helping offset mounting expectations of an imminent interest rate rise.

The S&P/ASX 200 rose 50.9 points, or 0.6 per cent, to 8743.50, even as most sectors struggled. Just four of the index’s 11 sectors finished in positive territory.

The move followed a sharp rethink by the market on the Reserve Bank of Australia’s board meeting next week. The Australian dollar surged to US71.75¢ and bond yields jumped after hawkish comments from RBA deputy governor Andrew Hauser.

Elevated risks

Hauser warned late on Tuesday that failing to act decisively could allow inflation expectations to become entrenched, which would be “bad for everyone”.

Money markets are now pricing about a 70 per cent chance of a rate rise on March 17, up from just 39 per cent before Hauser’s remarks. Economists have also shifted their forecasts, and National Australia Bank and Westpac were among those to bring forward their rate-rise forecasts to next Tuesday.

Datt Capital chief investment officer Emanuel Datt said markets were still beholden to the “fog of war” in Iran.

“The risk of an energy shock remains elevated, and inflation remains an ongoing issue. The RBA is likely to raise rates again next week, given its proactive stance on inflation,” he said.

“We anticipate softer than typical credit and equity markets in this environment, with the mid and upstream energy sectors the likely beneficiaries of the conflict and rising inflation.”

Strong gains in miners and banks buoyed the ASX. Materials gained almost 2 per cent as BHP rose 1.4 per cent to $51.96, Fortescue 3.7 per cent to $19.98 and Champion Iron 6.9 per cent to $4.94 after iron ore climbed above $US104.

Rare earth producer Lynas Rare Earths soared 16.2 per cent to $20.59 after extending its long-term supply agreement with Japan Australia Rare Earths to 2038, securing a major offtake deal for critical minerals used in Japanese industry.

Gold miners also rallied as bullion climbed above $US5200 an ounce. Ora Banda Mining jumped 21.5 per cent to $1.41 after announcing a major upgrade to the gold resource at its Round Dam deposit, while Northern Star gained 3 per cent to $26.75.

Banks also provided support, with higher interest rates expected to boost lenders’ net interest margins. Commonwealth Bank firmed 0.5 per cent to $172.67, Westpac 0.5 per cent to $41.03 and National Australia Bank 1.1 per cent to $47.33. ANZ added 1.8 per cent at $37.98.

Oil fell 1 per cent to $US86.93 a barrel after reports that the International Energy Agency was considering the largest release of strategic oil reserves in its history. Energy stocks posted modest gains with Woodside up 0.8 per cent to $30.42 and Santos 0.1 per cent to $7.38.

Meanwhile, higher rate expectations weighed on technology, property and retail stocks that are sensitive to borrowing costs. WiseTech dropped 3.6 per cent to $49.24, Goodman Group 1.5 per cent to $27.07, and JB Hi-Fi 1.5 per cent to $78.71.

Stocks in focus

In company news, DroneShield gained 1.5 per cent to $4.08 after announcing it would start counter-drone manufacturing in the European Union.

GQG Partners slid 5.5 per cent to $1.80 after reporting $US3.2 billion in net outflows for February, despite funds under management rising to $US172.9 billion ($242.9 billion).

Macquarie Technology Group surged 7 per cent to $67.15 after securing a $200 million hybrid investment from the National Reconstruction Fund Corporation to expand digital infrastructure and cybersecurity services.