The ASX has lifted for the second day in a row.
The S&P/ASX200 gained 20.80 points or 0.29% to 7,113.80. Over the last five days, the index has gained 0.89% but is down 4.44% for the last year to date.
Top-performing stocks were Lynas Rare Earths Ltd up 6.22% and Mineral Resources Ltd (ASX:MIN) up 6.03%.
During the day Financials (0.94%) and Materials (+1.04%) outperformed, with Energy (+1.94%) the strongest sector. Utilities was also high, lifting 1.23%. In the losers category was Real Estate (-1.07%), Communication Services (-1.08%), Health Care (-0.98%) and Information Technology (-0.92%).
Woodside-BHP merger looms large
There’s a quiet confidence that the Woodside Petroleum Ltd merger with BHP Petroleum will receive shareholder support on Thursday.
Woodside CEO Meg O’Neill believes the proposed $63 billion merger with BHP will get the necessary support it needs, which would create a world top-10 oil and gas producer based in Australia.
If the deal is successful, the merged entity would almost double production and reduce gearing. This would increase the balance sheet for investments needed to transition to low-carbon energy.
“I’m not going to count my eggs before they’re hatched but we’re really feeling very good about how our investors understand the strategic opportunity that is presented by the merger,” O’Neill told the Australian Petroleum Production & Exploration Association (APPEA) conference in Brisbane.
“Obviously in today’s environment with the real focus on energy security the fact that we have the opportunity to have a company that’s got a big position in Australia, a big position in North America, I think our investors understand why we are pursuing it, so we feel good – but ask me again Thursday afternoon.”
At least 50% support for the scrip-based deal is required for it to proceed. BHP shareholders would receive Woodside shares as payment for BHP Group Ltd’s petroleum division.
Howard backs Frydenberg but concedes uphill battle
With only a few days to go before the Federal election, former PM John Howard has hit the campaign trail with Treasurer Josh Frydenberg, who is battling to hold his Kooyong seat.
Howard has called on small l liberal voters, who may be disheartened by the direction of the party to stick with the current government.
“I find this a harder one to call than just about any I can recall,” Howard told Sky News.
“There are people who, in some of the seats who I think, have this funny idea that they can sort of send a message to the Liberal Party by voting for an independent but still have a Liberal government.
“Forget it. If you want a Liberal government, you’ve got to vote for a Liberal candidate.”
Howard has conceded, there is much discontent surrounding the Morrison Government.
“The longer you’re in office, inevitably, no matter how good you may be, you upset people. People get a bit tired of you. It’s just human nature.
“That’s just the nature of politics. The important thing is to be able to say to the public, to look them in the eye and say ‘I did what I believed was right’.”
Current PM Scott Morrison is not campaigning with Frydenberg due to perceived unpopularity. There is a fear that unpopularity could damage Frydenberg’s chances of taking the Opposition leader position. Howard downplayed Morrison’s unpopularity.
“I read a lot about the so-called unpopularity of the Prime Minister. I don’t find it. I find a lot of respect for him. But inevitably if you take tough decisions, you upset some people. I went through periods of great unpopularity.”
“This is a tight election. The important thing is serious people take politics seriously.”
Analysts who do take these things seriously are saying this is Anthony Albanese’s election to lose.
RBA set to lift rates by 40 basis points
The Reserve Bank’s meeting minutes today have led JP Morgan to the conclusion that the central bank will further lift interest rates in quarter-percentage-point increments.
“While it’s clear the cash rate will move higher in coming meetings, today’s minutes failed to shed further light on the magnitude of the next adjustment,” JPMorgan economist Tom Kennedy said.
“We continue to forecast a 40bp move in June, though note that the ‘business as usual’ narrative increases the probability the RBA sticks with 25bp increments.”
Capital Economics has agreed, saying the minutes point to aggressive interest rate hikes this year.
The minutes said recent inflation and wages information were "consistent with more persistent inflationary pressures" arising from limited domestic spare capacity, "it would be more difficult to return inflation to the target if the inflation psychology in Australia were to shift in an enduring way" and "further increases in interest rates would likely be required".
Capital Economics says the RBA is "growing increasingly worried that a high inflation psychology will become embedded" in Australia.
"Given our view that inflation will rise more sharply than the bank anticipates and the unemployment rate will fall further in the months ahead, we expect the bank to hike the cash rate at every meeting this year," Capital Economics economist Ben Udy said.
Udy said a 40bp hike is likely in August.
In regard to its 25bp rate hike this month, the RBA said: “an argument for an increase of 40bp could be made given the upside risks to inflation.”
"We expect those upside risks to inflation to materialise in Q2 and forecast trimmed mean inflation to rise to 5%, much stronger than the RBA’s forecast of 4.5%," Udy says.
"That will prompt the bank to ramp up the pace of tightening, lifting rates by 40bp in August. If we’re right then the cash rate should reach 2.25% by the end of this year and a further two hikes in 2023 will take the cash rate to a peak of 2.75%."
On the small cap front
There were several winners today, with one company a real standout…
- Havilah Resources Ltd finished 82.35% higher.
- Critical Resources Ltd finished 19.18% higher.
- South Harz Potash Ltd finished 11.54% higher.
- White Rock Minerals Ltd finished 10.91% higher.
- Blue Star Helium Ltd finished 10.34% higher.
- Incannex Healthcare Ltd finished 10.33% higher.
- Core Lithium Ltd finished 8.86% higher.
- Latrobe Magnesium Limited finished 7.14% higher.
- New Century Resources Ltd finished 5.67% higher.
- Latin Resources Ltd finished 4.76% higher.
- Alligator Energy Ltd finished 3.13% higher.
- Perseus Mining Ltd finished 2.95% higher.