ASX 200 afternoon report: 27 June 2024

The ASX 200 trades 81 points (-1.05%) lower at 7701 at 1.15pm AEST.

Local market reacts to inflation surge

The fallout from yesterday's red-hot inflation numbers has rocked the local market for a second day. Shortly after the opening bell today, the local index dived 128 points (-1.64%) to a four-week low of 7654, before some support for the market emerged.

RBA's hawkish stance

The Reserve Bank of Australia (RBA) has continually voiced its unease over high inflation and put the market on notice in mid-June, when it noted that the board discussed the option to hike rates but not the option to cut rates. The return of the comment that the RBA will do “what is necessary” to return inflation to target was viewed as an additional hawkish development.

Inflation's impact on rate hike prospects

Yesterday's rise in the RBA’s preferred measure of inflation, the Trimmed Mean, to 4.4% in May puts it on track to comfortably beat the RBA’s own forecast of 3.8% year-on-year (YoY) for June. This means it will likely take a significant and unlikely downside surprise in June inflation data to prevent the RBA from delivering a 14th-rate hike to 4.60% before year-end.

ASX 200 Stocks

Real estate sector

The ASX 200 and its interest rate-sensitive sectors are not big fans of higher interest rates. This is well illustrated by the ASX 200 Real estate sector, which, after its two-day tumble, is trading 5% below:

• Mirvac Group dived 5.97% to $1.81
• GPT Group dived 5.87% to $4.01
• Stockland Corp lost 5.80% to $4.14

Financial sector

There was relief for the army of "big bank" short sellers as the ASX 200 Financial sector extended its fall from Tuesday's fresh seventeen-year high. Higher interest rates dampen the appetite for credit and can lead to more mortgage holders falling behind on their repayments, leading to higher bad debts.

• NAB fell 1.63% to $35.70
• Westpac lost 1.48% to $26.90
• CBA fell 1.39% to $125.12
• ANZ lost 1.05% to $28.16

Consumer-facing stocks

The Federal government's big spending budget, announced in mid-May, which included rebates and other cost-of-living relief measures for households, prompted a strong rebound in some consumer-facing stocks. However, the prospect of higher interest rates has seen a chunk of those gains unwound.

• Adairs is trading 6.46% lower at $1.81
• JB Hi-Fi has lost 5.33% to $61.09
• Harvey Norman is trading 5.13% lower at $4.24

Mining sector

Despite being largely insulated from the effect of higher interest rates and a 3% rally in the price of iron ore overnight, the big miners have offered little in the way of shelter from the storm.

• Mineral Resources fell 1.31%
• BHP lost 0.62% to $43.07
• Fortescue lost 0.21% to $21.58
• Rio Tinto bucked the trend, gaining 0.65% to $121.76

ASX 200 technical analysis

With just one full trading session left in June, the ASX 200 is now flat for the month after being up over 2% in the first two weeks of June.

Technically, the ASX 200 isn’t likely to see a daily close below uptrend support at around 7670 coming from the April 7492 low. In order to keep the uptrend intact and avert a deeper pullback towards the 200-day moving average at 7457.

ASX 200 daily chart

• _{Source: TradingView. The figures stated are as of 27 June 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.}