Despite the latest interest rate rise, the ASX was higher today.
The S&P/ASX200 gained 16.70 points or 0.25% to 6,629.30. Over the last five days, the index has lost 1.99% and 9.37% over the last 52 weeks.
Top-performing stocks in this index were Regis Resources Ltd (ASX:RRL) up 11.03% and Life360 Inc. (ASX:360) up 11.17%.
What’s in the news
Cash rate rises
The Reserve bank of Australia (RBA)’s efforts to clamp down on rising inflation has seen it raise the cash rate by another 0.5% to 1.35%.
Governor Phillip Lowe said: “Today‘s increase in interest rates is a further step in the withdrawal of the extraordinary monetary support that was put in place to help insure the Australian economy against the worst possible effects of the pandemic.”
This is not the last of the rate rises, with more pain for mortgage holders ahead as cost of living pressures begin to strain.
The size of the next rate rise is yet to be determined.
“The size and timing of future interest rate increases will be guided by the incoming data and the board’s assessment of the outlook for inflation and the labour market,” Dr Lowe said.
The rise means those with a $750,000 mortgage are paying $500 more a month than they were in April.
RateCity.com.au research director Sally Tindall has predicted another 50 basis points rise in August.
"If this happens, it will be the sharpest rise to the cash rate since 1994, when the RBA hiked by 2.75 percentage points in the space of five months," she says.
“Borrowers need to ready themselves for rates to rise by a total of 2.5 percentage points by early next year, potentially even higher."
Federal Treasurer Jim Chalmers has expressed his sympathy, although those who are doing it tough may find the words a little hollow.
“Rates were expected to rise and they’re expected to bite,” Dr Chalmers said in a statement immediately after the RBA’s decision.
”When it comes to inflation we expect it to get worse before it gets better and the Reserve Bank has flagged further rate rises.
“While the trajectory of rising interest rates was set before the election, this rate rise is another blow to workers and families already under significant cost of living pressure.
“For a lot of families and a lot of homeowners, they will have to find, in already stretched household budgets, even more to service the mortgage.
“A lot of people are doing it incredibly tough already with the skyrocketing costs of essentials, like groceries, and petrol, and electricity, and this will make life even harder for a lot of Australians.”
Mortgage holders now have several important decisions to make including whether to find a new, cheaper bank or lock in a fixed rate.
The latter decision is not a simple one.
“A few months ago, you could get fixed rates that were lower than variable rates. However, now, fixed rates are averaging 4-5-plus per cent (with shorter fixed terms offering rates at the lower end), while the average variable rate is 2.5% and likely to be 3% by end of June,” Money.com.au spokesperson and licensed financial adviser Helen Baker said.
“You will need to try to forecast where rates will go and work out whether it is best to pay more interest in a fixed- rather than variable-rate loan. Will variable rates outpace fixed rates over the next three to five years? Keep in mind that when the fixed term ends you will go to a variable rate.”
According to the ASX, Futures markets are factoring a cash rate of above 3% by December.
It is also thought that consumer price growth will fall back towards 2-3% next year, easing pressures as supply chain issues normalise and commodity prices stabilise.
“Medium-term inflation expectations remain well anchored, and it is important that this remains the case,” Dr Lowe said.
Adverse weather events, however, may make the stabilisation more difficult. Parts of NSW are currently under water … again.
“Grocery prices are already skyrocketing and natural disasters like this are notorious for making that challenge worse. We already expected the inflation challenge in our economy to get worse before it gets better and this, unfortunately, we will be part of that.”
Despite rate rises, the ASX will outperform US markets
That’s the word from VanEck head of investment and capital markets Russel Chesler who says that as the ASX is less dominated by growth stocks and better linked to commodity markets, it can weather the rate rise storm.
"We would expect to see the Australian share market continue to outperform global markets in the second half of 2022," he says.
"The market advanced on the announcement by the RBA and the big four banks jumped by around 0.5%. Other big moves on the ASX today include resource companies Regis Resources up 10.3% and gold miner St Barbara up 6.9%.
"We expect to see a fall in house prices spread to other cities in the second half of 2022 and into 2023, which could represent a significant challenge to household wealth as well as bank earnings."
Here’s a look at five of today's top small-cap stories.
Flynn Gold soars on hitting 5.4 metres at 10.63 g/t gold in maiden diamond hole at Trafalgar prospect in Tasmania
Fynn Gold Ltd returned strong results in its maiden drilling program underway at Trafalgar prospect within the Golden Ridge Project in northeast Tasmania with shares soaring as much as 90%.
Lithium Power International secures tenure in all three major WA hard rock lithium areas with two acquisitions
“The acquisition of these properties in highly prospective areas is part of our strategy to add to the portfolio of LPI’s Western Australian hard rock spin out company, Western Lithium (TSX:WLC) Ltd,” CEO Lithium Power International Ltd (ASX:LPI) Cristobal Garcia-Huidobro said. LPI was 5.6% higher at market close.
Red River Resources hits 257 g/t gold within 4.5 metres at 29.5 g/t at Hillgrove in New South Wales
Red River Resources Ltd (ASX:RVR) has struck bonanza-grade gold in the first hole drilled at Bakers Creek prospect of the Hillgrove Gold Project in New South Wales, with a priority assay returning 4.50 metres at 29.5 g/t gold and 0.3% antimony from 466 metres, including 0.45 metres at 257 gold from 467.75 metres. RVR finished the day 3.2% higher.
SenSen Networks notches up another record month for sales cash inflows
“I am pleased to see consecutive months of record cash inflows from customers and revenue momentum across all our business verticals,” said SenSen Networks Ltd CEO Dr Subhash Challa. SNS was even for the day.
Noxopharm lauds participation of Mayo Clinic and Washington University in CEP-2 Sarcoma trial
Noxopharm Ltd (ASX:NOX) has added three more US sites for its CEP-2 sarcoma study following the participation of the Mayo Clinic and Washington University in the study, bringing the number of well-known participating US cancer centres to four. NOX was 6.96% higher at close.
On your six
There’s plenty going on in the biotech space and one company is making great strides in fibrotic diseases.
AdAlta alters development program to maximise potential partner opportunities
AdAlta Ltd (ASX:1AD)’s Tim Oldham discusses the latest developments in its main i-body platform, AD-214, with Proactive’s Elisha Newell.
The one for good luck…
Coffee with Samso: Greatland Gold's Havieron gold-copper discovery in Paterson Range
Greatland Gold Ltd's growth drilling program continues to expand the mineralised system at the Havieron gold-copper project in Western Australia.