- ASX 200 Index corrects after reaching record highs on Tuesday.
- Australia’s market sentiment improved due to the positive manufacturing performance in China.
- Genex Power has verified that Fortescue has not fulfilled the conditions precedent for one of Queensland’s largest renewable energy projects.
The ASX 200 Index retreats to around 7,880 after reaching new record highs on Tuesday. The index saw support from gains in materials, mining, and utilities sectors. Sentiment received a boost from positive manufacturing performance in China, Australia’s primary trading partner, as indicated by a private survey showing factory activity expanding at its fastest rate in 13 months.
Some of the top gainers included West African Resources, which surged by 5.00% to reach 1.26; Newmont, rising by 1.65% to 36.43; and Gold Road Resources, gaining 4.87% to reach 1.66. Conversely, among the top losers were Orora, plummeting by 13.42% to 2.36; Netwealth Group, declining by 5.16% to 20.03; and Megaport, decreasing by 4.60% to 14.30.
Macmahon Holdings specializes in providing comprehensive mining services to clients across Australia and Southeast Asia, with a particular focus on the gold sector. The company has expanded its operations into capital-tight sectors such as mining support services and civil infrastructure, diversifying its portfolio.
Genex Power has confirmed that Fortescue, a major Australian resources company, has not yet met the conditions precedent for one of Queensland’s largest renewable energy projects. Fortescue had previously entered into a 25-year solar power purchase agreement (PPA) with Genex in October 2023 for the Bulli Creek Solar and Battery Project (BCP).
The Reserve Bank of Australia’s (RBA) March meeting minutes indicate that the central bank did not consider the option of raising interest rates. With inflation rates persisting higher than those in other countries and a tight job market, the RBA is anticipated to maintain the current cash rate until at least November.
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 had always traditionally been thought of as a negative factor for currencies since it lowers the value of money in general, the opposite has actually 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.
