ASX dips as slumping iron ore prices hit big miners

Arcadium Lithium shares lost 4.5 per cent, Strike Energy was down 4.4 per cent and IGO shares slipped 3.9 per cent.

The lowdown

UBS’ equities team described commodities as giving a “mixed” performance in the second quarter of 2024, with “high levels of divergence between different commodities and stocks”; iron ore players dipped 25 per cent in contrast to copper/gold stocks that increased 10 per cent. It is clear they expect this trend to continue. “Looking into [the second half] we prefer gold and copper equities and stay cautious on the lithium sector,” the UBS analysts wrote in a note to clients.

On the economy and interest rates, Judo Bank economists believe the Reserve Bank appears unwilling to lift interest rates but would do so if it must. “The employment and inflation figures for June will be the most important data between now and the RBA’s August meeting,” the economists wrote in a research note to clients.

“We expect that the upcoming inflation and employment data for June will surpass the RBA’s projections… leading to a 25-basis point increase in the cash rate in August. The debate could quickly move to whether we need to see a follow-up 25bp hike in September, given that a single 25bp hike may not ‘turn the dial’ on the inflation outlook.”

Another rate hike would be the last thing mortgage holders want: the average owner-occupier mortgage has climbed to $626,055 – the highest level recorded by the Australian Bureau of Statistics – according to RateCity figures, and Australians are taking out larger loans than ever.

On Friday, US stocks rose to more records after a highly anticipated report on the US job market bolstered Wall Street’s hopes that interest rates may fall soon.

The S&P 500 Index climbed 0.5 per cent to another record high. The Dow Jones Industrial Average rose 0.2 per cent, while the Nasdaq Composite Index added 0.9 per cent to its own record.

The action was more decisive in the bond market, where Treasury yields sank following the jobs report. Employers hired more workers last month than economists expected, but the number was still a slowdown from May’s hiring. Plus, the unemployment rate unexpectedly ticked higher, growth for workers’ wages slowed and the US government said hiring in earlier months was lower than previously indicated.

Altogether, the data reinforced belief on Wall Street that the US economy’s growth is slowing under the weight of high interest rates. That’s precisely what investors want because a slowdown would keep a lid on inflation and could push the Federal Reserve to begin cutting its main interest rate from the highest level in two decades.

Tweet of the day

Quote of the day

“This PEXA monopoly needs to be tackled head-on by government. We now know that it is building out a data empire similar to what we see in Google and Facebook, but with little to no government regulation.” That’s Philip Joyce, the chief executive of Sympli, a rival to PEXA that enables electronic transfer of property titles and registration of mortgages. Joyce – and the NSW Productivity Commission – are warning that intervention is needed to break Pexa’s monopoly on Australia’s $800 billion electronic property settlements.

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With AP

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