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First day of new interest-rate environment was a slight downer for Australian share market.

Daily Market Update

The first day of a new interest-rate environment was a slight downer for the Australian share market, with the benchmark S&P/ASX 200 easing 11.5 points, or 0.2 per cent, to 7304.7 points.

The gauge has lost 1.8 per cent this week, to be down 1.9 per cent since the start of the year. 

The S&P/All Ordinaries index, which tracks 500 stocks, fell 22.8 points, or 0.3 per cent, to 7564.8.
The Financials sub-index added 0.7 per cent, with all four of the big banks rising after lifting their variable-rate loan rates following Tuesday’s hike in the cash rate.

NAB added 33 cents, or 1 per cent, to $32.44; Westpac gained 17 cents, or 0.7 per cent, to $24.07; CBA rose 72 cents, also 0.7 per cent, to $102.98; and ANZ advanced 12 cents, or 0.4 per cent, to $27.38 after announcing a 4 per cent lift in cash profit from continuing operations for the six months ending March 31, to $3.1 billion, coming in slightly above analyst estimates.
ANZ said it did not expect its mortgage book to grow as fast as the market until the end of the current half, as banks enter a new period of rising interest rates.

ANZ dropped its cost reduction target, which had it aiming to cut total expenses from $8.7 billion in 2021 to $8 billion at the end of the 2023 financial year, citing inflationary pressures.
Again, winners were scarce, but investment platform operator HUB24 gained 93 cents, or 3.9 per cent, to $24.83; packaging group Orora advanced 13 cents, or 3.4 per cent, to $3.99, after an upbeat report.

British digital bank Virgin Money UK added 9 cents, or 3 per cent, to $3.08; Insurance Australia Group rose 13 cents, or 2.9 per cent, to $4.67; and grain handler and marketer GrainCorp continued its strong recent form, rising 23 cents, or 2.2 per cent, to $10.73.
Down by the snake
Shareholders in African potential lithium producer AVZ Minerals had an interesting day, with the shares surging 19% higher to $1.18 in early trade after the company said the Democratic Republic of Congo had awarded a mining licence to Dathcom, a company in which AVZ holds a large stake, then plunging to 80 cents – down 19.2 per cent on the day – as the market digested ownership issues revealed lower down in the release.
Temple & Webster dropped 38 cents, or 7 per cent, to $5.02, despite the online furniture retailer announcing revenue was up 23 per cent for the first four months of 2022, versus the same period last year.

Elsewhere in retail, JB Hi-Fi lost $2.49, or 4.8 per cent, to $49.73 after the electronics heavyweight elected not to give full-year sales and earnings guidance.
Flight Centre surrendered $1.51, or 6.7 per cent, to $21.19 after forecasting a full-year loss of between $195 million and $225 million.

Big Mining was also on a downer, with BHP losing 26 cents, or 0.6 per cent, to $47.40; Rio Tinto down 74 cents, or 0.7 per cent, to $111.11; and Fortescue Metals easing 49 cents, or 2.4 per cent, to $20.12.
Fed hikes as well
Overnight, as widely expected, the US Federal Reserve lifted its benchmark interest rate, the target federal funds rate, by half a percentage point, to a range of 0.75 per cent–1 per cent, to fight a 40-year high in inflation.

Fed Chair Jerome Powell said the central bank was ready to approve half-percentage-point rate hikes at upcoming policy meetings in June and July.
Current market pricing implies that the rate will rise to a range of 2.75 per cent–3 per cent by year’s end. The Fed also indicated it will begin reducing asset holdings on its US$9 trillion ($12.3 trillion) balance sheet, implying the start of “quantitative tightening.”
For two years after the onset of the COVID-19 pandemic, the Fed bought more than US$4 trillion ($5.5 trillion) worth of assets, mostly US Treasury bonds and bills, and mortgage-backed securities, to help stimulate the economy.

The Fed finally stopped purchasing bonds in March as the central bank began to pivot toward slowing inflation; now, it is starting the reversal, to take money out of the financial system.
US stock markets jumped following the announcement, with investors prepared to bet that the Fed can slow inflation without causing a recession.

The S&P 500 index surged 124.7 points, or 3 per cent, higher to 4,300.17 points; the 30-stock Dow Jones Industrial Average gained 932.27 points, or 2.8 per cent, to 34,061.06; and the tech bellwether, the Nasdaq Composite Index, streeted the other two with a 3.2 per cent (401.1 points) rise to 12,964.86 points.

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