RBA Cuts Rates While Markets Cut Gains

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Welcome to Equity Espresso’s Market Recap.

Aussie shares fell on Tuesday, with the S&P/ASX 200 index dropping 0.66% to 8,481.0 in a newsday dominated by the RBA - who cut the cash rate for the first time in four years. More on that below ⬇️ 

Seven sectors finished lower, led by Energy (-1.44%) stocks, as Woodside (-1.47%) extended its decline following a dividend guidance disappointment. Financials (-1.40%) and Discretionary (-1.10%) stocks also fell, while Health Care (+0.67%) and Real Estate (+0.24%) were the two best performers.

There was no lead-in from Wall Street, with the U.S. stock market closed on Monday for the Presidents Day federal holiday, giving investors a break after all three major indexes posted solid gains last week.

The Reserve Bank of Australia delivered its first interest rate cut in over four years, lowering the cash rate to 4.10% from 4.35%. Governor Michele Bullock described it as a line-ball decision, cautioning against expectations of further cuts amid global uncertainties, including Trump's tariff war, tight labour markets, and wage pressures, despite inflation falling faster than previously forecast.

All four major banks quickly announced they would pass on the full 25-basis-point cut to customers, with Westpac and NAB leading the response within minutes of the RBA's announcement.

Company News

• Baby Bunting (-1.09%) confirmed its full-year guidance despite suspending its interim dividend to fund capital expenditure after reporting half-year net profit up 37.3% to $4.8 million. While sales grew 2.4% to $254.4 million and earnings rose 10.8% to $31.8 million, early second-half trading has slowed.

• BHP Group (+0.42%) announced its lowest interim dividend in eight years at US50¢ per share after reporting a 23% drop in half-year profit to $US5.08 billion, below analyst expectations. Despite higher production volumes, weaker commodity prices significantly impacted earnings, with iron ore and coking coal prices down over 20%.

• Challenger (-8.97%) reported strong first-half results, with net profit rising 12% to $225 million and statutory profit up 28% to $72 million, driven by record lifetime annuity and Japanese sales totalling $4.6 billion.

• Dexus (-0.77%) returned to profitability with $10.3 million in half-year earnings, reversing last year's $597.2 million loss, despite revenue falling 9.6% to $434.7 million.

• HMC Capital (+9.90%) reported strong half-year results, with assets under management increasing 45% to $18.5 billion and pre-tax earnings surging 240% to $202.2 million. Success in private equity and the DigiCo REIT IPO drove growth, with the company maintaining its full-year dividend guidance of 12¢ and declaring a 6¢ interim dividend.

• Hub24 (+3.74%) reported a 54% increase in half-year profit to $33.2 million and raised its interim dividend 30% to 24¢, driven by record platform inflows of $9.5 billion. Total funds under administration reached $120.9 billion, prompting the company to upgrade its FY26 target to $123-135 billion.

• Infomedia (-1.98%) reported a 2% increase in half-year revenue to $71.2 million with a net profit of $8.3 million, maintaining its full-year revenue guidance of $142-149 million.

• Monadelphous (+5.32%) delivered strong half-year results, with revenue rising 4.2% to $1.05 billion and net profit jumping 41.3% to $42.5 million. EBITDA grew 30.2% to $79.8 million with improved margins, leading to a fully franked interim dividend of 33¢.

• Reliance Worldwide (-3.91%) reported a 31% increase in half-year profit to $US67.2 million and 14.8% sales growth, primarily driven by its Holman Industries acquisition.

• Seek (+1.82%) reported a 28% drop in half-year adjusted profit to $77 million, though it increased its interim dividend 26% to 24¢. Separately, its venture fund sold its Employment Hero stake to KKR for $95 million and revalued its software portfolio to $2.2 billion, up $100 million.

Economic Data

• The Reserve Bank of Australia (RBA) lowered its cash rate by 25bps to 4.10% at its January meeting, which was in line with market consensus. It was the first rate reduction since November 2020.

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Quick Singles

🌎️ Around The Globe

• Meta announced the formation of a new robotics division within Reality Labs to develop A.I. and software platforms for humanoid robots. The team aims to create foundational technology for manufacturers rather than consumer products.

• Nissan CEO Makoto Uchida indicated the company may relocate production from Mexico in response to Trump's tariffs, noting that 320,000 vehicles are currently exported from Mexican facilities to the U.S. market.

• OPEC+ may delay its planned April oil supply increases, according to Bloomberg sources, though Reuters reports conflicting information from delegates and Russian officials. The group has already postponed production increases three times since June 2024 amid forecasts of market surplus and lower prices, with major banks projecting oil to fall to the $60s by late 2025.

• South Korea has announced a government initiative to acquire 10,000 high-performance GPUs this year, with acting President Choi Sang-mok stating that AI competition has evolved from corporate rivalry to national innovation systems.

• TSMC and Broadcom are exploring potential bids to split Intel into two separate entities, according to WSJ reports. Broadcom is interested in Intel's chip design and marketing operations, while TSMC is considering taking control of its manufacturing facilities.

• Uber has filed a lawsuit against DoorDash in San Francisco, alleging the delivery company engaged in anticompetitive behaviour by forcing restaurants into exclusive partnerships, increasing costs for businesses and consumers.

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*1-year, 3-year and 5-year returns are calculated as of January 31, 2025.

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