A new report “from the coalface” of super fund investing has gone some way to quantifying the cost of shonky investment management, with members potentially losing out on hundreds of thousands of dollars.
Surging equity markets have driven the Future Fund’s return higher, but its prediction that inflation will be stickier than expected has been born out and it “remains conscious of the potential for significant deterioration”.
Rate Rises the New Normal
After a positive start, the local market turned tail after the Reserve Bank board lifted the cash rate target by 50 basis points to 2.35 per cent, its highest level since December 2014, at its meeting yesterday. The central bank has now raised interest rates for five months in a row, in its most aggressive series of rate rises since 1994, and has told investors to prepare for more rate increases in coming months.
As expected, the banks were weaker on the news, as investors worried about the effect on their loan books in the coming months as households deal with increasing mortgage costs. Commonwealth Bank closed the day down 40 cents, or 0.4 per cent, at $96.11; with Westpac down 8 cents, or 0.4 per cent, to $21.27; ANZ easing 4 cents, or 0.2 per cent, to $22.59; and National Australia Bank dipping 10 cents, or 0.3 per cent, to $30.24.
At the headline index level, the S&P/ASX 200 retreated 25.7 points, or 0.4 per cent, to 6,826.5, and the broader All Ordinaries index shed 18.6 points, or 0.3 per cent, to 7,055.9.
Coal, uranium, lithium on the march
Sections of the resources market were very strong, particularly Old King Coal, which continued on its tear, as benchmark Newcastle thermal coal futures surged 5.2 per cent to a record high of $US457.80 a tonne. The electricity coal price has more than doubled in 2022.
Over the session, shares in Whitehaven Coal gained 31 cents, or 3.7 per cent, to close at a fresh record high of $8.80, with the stock having nearly tripled over the past year. Fellow Queensland-based coal miner Yancoal surged 40 cents, or 6.3 per cent, to $6.71; it is up 180 per cent over the past year. Also in coal, New Hope Corporation advanced 33 cents, or 6.1 per cent, to $5.72; Stanmore Resources gained 11 cents, or 4.7 per cent, to $2.43; and Terracom was up 3.5 cents, or 3.5 per cent, to $1.02
Uranium stocks also continued their strong run, with nuclear energy back in favour amid Europe’s energy woes. Paladin Energy added 6.5 cents, or 7.8 per cent, to 90 cents, while Boss Energy closed up 19 cents, or 7.3 per cent, at $2.79; and Bannerman Energy gained 18 cents, or 8.3 per cent, to $2.35.
Lithium stocks were also in favour, with producer Pilbara Minerals adding 26 cents, or 7 per cent, to a record closing price of $3.96, and fellow producer Allkem up 58 cents, or 4.3 per cent, to $14.06. Lithium project developer Core Lithium leapt 13 cents, or 9.9 per cent, to $1.49, and fellow hopeful Lake Resources advanced 11 cents, or 9.6 per cent, to $1.20. Iron ore and lithium miner Mineral Resources gained 40 cents, or 0.7 per cent, to $60.34.
Among the bulk miners, BHP retreated 64 cents, or 1.7 per cent, to $37.27, Rio Tinto was down 97 cents, or 1.1 per cent, to $90.80, and Fortescue Metals eked out a 3 cent gain, to $16.44.
Stocks, bonds fall in US
In the US, stocks slumped as investors returned from a long weekend to assess what strong economic data and rising rates mean for the Federal Reserve’s aggressive tightening campaign.
The 30-stock Dow Jones Industrial Average fell 173.14 points, or 0.6 per cent, to close at 31,145.30, boosted by defensive stocks such as Johnson & Johnson and Coca-Cola. The broader S&P 500 eased 16.1 points, or 0.4 per cent, to 3,908.2 and the tech-heavy Nasdaq Composite index retreated 86 points, or 0.7 per cent to 11,544.9, marking its seventh consecutive backward day, its longest losing streak since 2016.
Bond yields surged, with the yield on the US 10-year bond gaining 0.16 percentage points to 3.35 per cent at its high for the day – rising bond yields mean falling bond prices. Both share and bond prices are falling as strong economic data fuels expectations of further big interest rate rises by the Federal Reserve, to bring inflation under control.
In commodities, Brent oil lost US$2.89, or 3 per cent, to US$92.85 a barrel, while West Texas Intermediate eased 5 cents to US$86.85 a barrel. Gold was down 50 cents at US$1,712.30 an ounce. The Australian dollar is buying 67.37 US cents this morning.
