Tarza- ASX 200 Index follows the top performing Health Care and Consumer Staples sectors.
- Wall Street experienced losses across all three US benchmarks due to profit booking and market revaluations.
- Barton Gold has initiated a $4 million capital-raising effort to progress its Tunkillia and Tarcoola projects.
The ASX 200 Index edges higher to near 7,800 on Wednesday, retracing its recent losses from the previous session. The Health Care and Consumer Staples sectors were the top performers, with notable gains seen in Aft Pharmaceuticals, Botanix Pharmaceuticals, Skin Elements, and Wingara AG. However, Australian shares experienced a slip at the open, mirroring modest losses across all three benchmarks in the United States (US). Investors opted to take some profits and reevaluate market valuations.
Furthermore, Australian consumer prices came in softer than expected, which could enhance market sentiment, thereby providing support to the domestic equity market. In February, the Monthly Consumer Price Index (YoY) rose by 3.4%, consistent with previous levels but slightly below the anticipated 3.5%. Still, the latest reading pointed to the lowest since November 2021. This softer figure could prompt the Reserve Bank of Australia (RBA) to consider a dovish stance on the interest rate trajectory.
The top performing stocks in the ASX 200 Index included Polynovo, which rose by 4.29% to 2.19; Johns Lyng Group, with a gain of 4.31% to 6.29; and Helia Group, up by 3.23% to 3.84. Conversely, the top losers were Incitec Pivot, declining by 2.40% to 2.85; Arcadium Lithium, down by 4.06% to 4.02; and Waypoint REIT, which fell by 0.55% to 2.50. The A-VIX experienced a significant decline, dropping by 0.51 points or 4.82% to reach 10.04. Meanwhile, the All Ordinaries Index is up, gaining 24.70 points or 0.31% to reach 8,061.40.
Global bank messaging network SWIFT has confirmed that a new interlinking solution could facilitate financial institutions conducting various transactions using central bank digital currency (CBDC) and other types of digital tokens.
Barton Gold’s $4 million capital raising initiative to advance its South Australian projects has garnered firm commitments from investors in Australia, Europe, and the US. The fundraising will comprise a $3 million placement at an issue price of $0.24 per share, along with a $1 million purchase plan for issuing 4.1 million new shares.
RBA FAQs
The Reserve Bank of Australia (RBA) sets interest rates and manages monetary policy for Australia. Decisions are made by a board of governors at 11 meetings a year and ad hoc emergency meetings as required. The RBA’s primary mandate is to maintain price stability, which means an inflation rate of 2-3%, but also “..to contribute to the stability of the currency, full employment, and the economic prosperity and welfare of the Australian people.” Its main tool for achieving this is by raising or lowering interest rates. Relatively high-interest rates will strengthen the Australian Dollar (AUD) and vice versa. Other RBA tools include quantitative easing and tightening.
While inflation has always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has been the case in modern times with the relaxation of cross-border capital controls. Moderately higher inflation now tends to lead central banks to put up their interest rates, which in turn has the effect of attracting more capital inflows from global investors seeking a lucrative place to keep their money. This increases demand for the local currency, which in the case of Australia is the Aussie Dollar.
Macroeconomic data gauges the health of an economy and can have an impact on the value of its currency. Investors prefer to invest their capital in economies that are safe and growing rather than precarious and shrinking. Greater capital inflows increase the aggregate demand and value of the domestic currency. Classic indicators, such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can influence AUD. A strong economy may encourage the Reserve Bank of Australia to put up interest rates, also supporting AUD.
Quantitative Easing (QE) is a tool used in extreme situations when lowering interest rates is not enough to restore the flow of credit in the economy. QE is the process by which the Reserve Bank of Australia (RBA) prints Australian Dollars (AUD) for the purpose of buying assets – usually government or corporate bonds – from financial institutions, thereby providing them with much-needed liquidity. QE usually results in a weaker AUD.
Quantitative tightening (QT) is the reverse of QE. It is undertaken after QE when an economic recovery is underway and inflation starts rising. Whilst in QE the Reserve Bank of Australia (RBA) purchases government and corporate bonds from financial institutions to provide them with liquidity, in QT the RBA stops buying more assets and stops reinvesting the principal maturing on the bonds it already holds. It would be positive (or bullish) for the Australian Dollar.
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