- 01ASX 200 -0.2% weekly; third straight loss.
- 02RBA rate to 4.6% by Sep; further hikes likely.
- 03Maas Group jumps 13% on FIRB news.
Market Wrap: third week of losses as rising rates take their toll
Not even a positive lead in from Wall Street was enough to save the Australian share market from its third consecutive week of losses.
After starting up on Friday on the back of a 1.1% rise in the S&P 500, the local market drifted lower as traders increasingly joined the camp of those betting on a looming interest rate rise after the Reserve Bank of Australia once again warned about higher inflation.
By the close on Friday, the ASX 200 had drifted down just 1 point lower to 8731.2 points, taking its weekly loss to 0.2% for a third straight week of declines as global central banks acted to increase interest rates and tensions in the Middle East caused a fresh round of risk-off sentiment.
Eight of the 11 sectors finished the session in the red, led down by the interest rate sensitive property sector.
That hesitation followed on from evidence given by the RBA governor Michele Bullock to the House of Representatives economics committee that upside risks to inflation were already materialising.
Her warnings that the RBA board would consider whether the three interest rate increases already delivered this year were enough to return inflation to target within a reasonable timeframe certainly led to some negative market sentiment.
Official rate rise now almost a lock
Markets and now giving a 95% chance that the RBA will raise the cash rate to 4.6% when it meets on September 28 and 29 and have fully priced another rise in November and an extra rate increase for March next year.
Westpac chief economist Luci Ellis joined a flock of other commentators who have now brought forward the chances of another rate rise in September rather than November, saying that RBA jawboning had increased: “In particular, Governor Bullock today flagged that upside risks to inflation appeared to be materialising.”
Big miners save the day
The main ray of sunshine on the ASX belonged to the big miners which saw their share prices track higher in line with iron ore and copper prices.
Shares in market leader BHP (ASX: BHP) were up 1.1% to $60.88 while its fellow Pilbara iron ore miner Rio Tinto (ASX: RIO) saw its shares jump up 0.9% to $167.655.
The other arm of the ASX dumbbell, the big banks, headed in the opposite direction with traders betting that higher official interest rates would add to the woes of the big mortgage lenders.
Shares in market leader Commonwealth (ASX: CBA) fell 1% to $152.43 while shares in National Australia (ASX: NAB) dropped 1.9% to $38.47. Shares in Westpac (ASX: WBC) and ANZ (ASX: ANZ) fared a little better, falling by 0.2% to $34.75 and $37.68 respectively.
Also hit hard was the energy sector, with falling prices for crude oil pushing shares in Woodside (ASX: WDS) down 1.7% to $32.42 while Santos shares (ASX: STO) dropped 0.7% to $8.51.
There was plenty of market action due to individual stock news with one good example being a 13% share price jump for industrial services provider Maas Group (ASX: MGH) to $6.38 after it got Foreign Investment Review Board approval to sell its construction materials division to Heidelberg Materials Australia for $1.7 billion.
Shares in critical minerals producer Arafura Rare Earths (ASX: ARU) surged 12% to 19¢ after it extended a supply deal with a global wind turbine manufacturer with material from its Nolans project in the Northern Territory.
Similarly, shares in mining services company Macmahon (ASX: MAH) also jumped 8.6% to $1.075 after it agreed to buy Aspect Engineering Solutions in a deal worth up to $90 million.
The week ahead
Once again central banks will be closely watched for indications of rising rates even if this week it means reading between the lines rather than watching actual decisions take place.
Here in Australia in the lead up to the next official rate decision announcement on September 29 there are several public appearances by RBA officials, including Governor Michele Bullock and Assistant Governor Sarah Hunter on Tuesday.
Needless to say their comments will be carefully watched for any more hints about the next meeting but so far it looks very much like they are softening up markets for a rise.
Also of interest will be the release of the August unemployment numbers on Thursday, which will be a contributing factor in the upcoming rate decision.
The unemployment rate was 4.5% in July, and while the labour market has eased a little recently, the RBA Monetary Policy Board announced at its August meeting that “the unemployment rate remained low and conditions were still considered a little tight.”
Will dividends get ploughed back into the market?
One of the more interesting questions for the coming week is whether the rush of dividends being paid will be directed into buying more shares or if the market will continue to struggle given the number of stocks trading ex-dividend.
Some of the bigger dividends being paid by commonly held company shares this week include BHP, Rio Tinto, Santos, Amcor, Telstra, Woolworth and Woodside so it would not be a surprise if some investors look to plough back some of that money due to lower share prices.
There are also a few ASX companies releasing results including Tuas Limited, Washington H. Soul Pattinson and Premier Investments.
Get the wire before the market opens.
The ASX small-cap stories that matter, filed before 9am AEST. Curated by the Small Caps desk.