ASX 200 afternoon report: 24 September 2024

Market reacts to PBOC and RBA decisions

The ASX 200 trades 19 points (-0.24%) lower at 8133 at 3.30pm AEST.

PBOC cuts lending measures

The ASX 200 has pared some of its earlier falls after the People's Bank of China (PBOC) cut several key lending measures to support its embattled economy, and the Reserve Bank of Australia (RBA) kept interest rates on hold at 4.35%.

After a run of dire economic data, the PBOC cut several key lending measures this morning, including the Bank's Reserve Requirement Ratio by 50 basis points (bps), the seven-day reverse repo by 20 bps, and down payments on second homes to 15% from 25%.

Impact on the China complex

The China complex, including Chinese stock markets, commodities, and ASX-listed mining stocks, has been desperately seeking further easing measures from Chinese authorities to counter the Chinese economic slowdown.

Today’s announcement removes some of the downside risks to Chinese growth and helps to end the downward spiral in the Chinese property market that has been observed over the past fifteen months.

RBA keeps rates on hold

Turning to the RBA, as widely expected, the Reserve Bank of Australia kept its official cash rate on hold today at 4.35% for a seventh consecutive meeting and retained its hawkish messaging. In the accompanying statement, the RBA reiterated that while higher interest rates are working to bring demand and supply closer to balance, underlying inflation has been above the midpoint of the target for 11 consecutive quarters and "has fallen very little over the past year."

More evidence of stubborn underlying inflation is expected when the monthly consumer price index (CPI) indicator for August is released tomorrow at 11.30am AEST. While headline inflation is anticipated to drop sharply to 2.7% from 3.5% due to energy rebates, the core measure, the trimmed mean, is expected to decrease only slightly to 3.7% year-on-year (YoY) from 3.8%.

RBA’s future stance

In recognition of the easing cycles commenced by other central banks, including the Federal Reserve (Fed), the RBA noted they are "removing only some restrictiveness and remain alert to risks on both sides, namely weaker labour markets and stronger inflation."

The RBA retained the sentence that the Board wasn't "ruling anything in or out," providing it with some optionality if underlying inflation readings were to ease in the months ahead. However, it also retained the hawkish sentence at the end of the statement, "The Board remains resolute in its determination to return inflation to target and will do what is necessary to achieve that outcome."

The RBA's decision today amounts to another hawkish hold, which fits our view that it's still too early for a dovish pivot from the RBA. However, a shift can occur very quickly, as we saw from the Reserve Bank of New Zealand (RBNZ) in August, and we think that the possibility of an RBA rate cut in December is underestimated.

ASX 200 stocks

Mining sector

• Mineral Resources surged 5.93% to $38.94
• Rio Tinto rose 3.82% to $116.32
• BHP gained 3.27% to $41.11
• Fortescue climbed 1.81% to $18.02

Uranium stocks soar

Staying with the dirt diggers, uranium stocks extended their gains today after Constellation Energy signed a deal with Microsoft in the US earlier in the week. The deal will see the Three Mile Island reactor return to service in 2028 and provide Microsoft with its energy requirements for its data centres for the next twenty years.

• Bannerman Energy soared 12.36% to $3.00
• Boss Energy gained 11% to $3.22
• Paladin Energy added 8.92% to $10.74
• Deep Yellow climbed 8.74% to $1.33

Banking sector

The big miners' support came at the big banks' expense.

• NAB fell 2.9% to $38.55
• CBA lost 2.80% to trade at $138.45, almost 5% below its record $145.24 high from two weeks ago
• Westpac lost 2.5% to $32.77
• ANZ fell 1.86% to $31.12

ASX 200 technical analysis

On Friday, the ASX 200 ran head-on into our band of daily and weekly trend channel resistance at 8230/50, from which we saw initial rejection. A loss of support at 8120/00 is needed for Friday's rejection to become more significant, which would then warn that a deeper pullback towards 7900 is underway.

Aware that should the ASX 200 break above resistance at 8230/50 it opens the way for the index to rally towards 8350.

ASX 200 daily chart

• _{Source: TradingView. The figures stated are as of 24 September 2024. Past performance is not a reliable indicator of future performance. This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation.}