21-05-2025
ASX rises amid bets for more rate cuts; CBA gains, Mayne tanks
Energy stocks powered ahead as oil prices jumped following a CNN report that new US intelligence suggests Israel is preparing for a potential strike on Iranian nuclear facilities. An attack would add to unrest in the Middle East, which supplies about a third of the world's crude. Brent crude rose above $US66 a barrel while West Texas Intermediate surged as much as 3.5 per cent before paring gains.
Oil and gas giants Woodside and Santos were up 1.2 per cent and 1.3 per cent, respectively.
Defensive sectors such as healthcare and utilities also gained, with pharmacy giant Sigma Healthcare gaining 1.3 per cent and sleep treatments maker ResMed rising 4 per cent. Power company Origin finished up 1 per cent, and gas pipeline provider APA added 0.9 per cent.
The laggards
Home sidings maker James Hardie slumped 6.2 per cent after saying its full-year net profit fell 17 per cent to $US424 million ($659 million) and warned that 'broader macroeconomic uncertainty could further impact the cost of home construction and weigh on consumer sentiment, influencing demand' in the current year. The company makes about 75 per cent of its sales in the US.
Mayne Pharma shares plunged 29.8 per cent after the drugmaker said its US suitor Cosette Pharmaceuticals was claiming Mayne's recent trading performance had triggered a material adverse change in their takeover agreement, which meant they would have to renegotiate for 10 days. If there's no positive outcome for Cosette, the US company plans to terminate the deal at the end of that period. Mayne disputes that a material adverse change has occurred.
Agricultural chemicals supplier Nufarm slumped 30 per cent to $2.81 after it posted a big slide in first-half profit and said it was reviewing the future of its ailing seed technologies lowdown
Lowdown
Market bets for more rate cuts in coming months have ramped up after the Reserve Bank admitted it saw a risk that Donald Trump's tariff war could drive Australia into recession.
At a press conference following the rate call on Tuesday, RBA governor Michele Bullock said the possibility of holding rates steady was quickly cast aside for a debate on how deeply to cut.
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'There was a discussion about 50 [basis points] and 25, and the board was of the view that 25 [basis points] was the right number,' she said.
The comments were more 'dovish' than expected, with the central bank forecasting slower inflation than previously, CommSec chief economist Ryan Felsman noted. His counterpart at CBA, Belinda Allen, said the bank was still predicting two more rate cuts this year, 'but we now expect these to come a little quicker than before, and favour August and September.
'The catalyst for the shift has been the RBA's shift in tone on inflation,' she said.
Financial markets put the chance of a follow-up rate cut at the bank's July meeting at 50-50, while a quarter percentage point cut by August is fully priced in. By early next year, markets believe official interest rates will be down to 3.1 per cent.
'The RBA looks more focused on supporting growth and the job market now as concerns about inflation fade — and that points to more rate cuts ahead,' said Bloomberg Economics Australia economist James McIntyre.
Lower rates ease the mortgage pressure on consumers in the cost-of-living crisis and make it cheaper for companies to borrow money, both of which are positive for corporate profits.
On Wall Street on Tuesday, momentum slowed after the market's rally from a deep hole nearly all the way back to its all-time high set earlier this year. The S&P 500 fell 0.4 per cent for its first drop in seven days, but stayed within 3.3 per cent of its record. The Dow Jones lost 0.3 per cent, and the Nasdaq composite slipped 0.4 per cent.
Tesla closed 0.5 per cent higher as CEO Elon Musk said he's committed to still leading the carmaker five years from now and expects to pare back his political spending, assuaging investor concerns about the future of his most valuable company.
