RBA Upgrades Inflation Forecasts

What made the news today?

• Lower residential listings send REA Group profits lower.

• Kraken to end crypto staking.

• Imugene wins US patent.

• US unemployment claims rise.

Friday ended on a whimper with the ASX200 losing ground in a week for the first time in 2023. The ASX200 ended the day losing 56.60 points, or 0.76%, to finish at 7,433.70. The RBA today revised its expectations for GDP in the short term and anticipates that inflation would reach its highest point in the June half, coming in at 6.25 percent.

There were ten of the eleven sectors that fell in value today with Tech (-2.04%), Energy (-1.68%) and Telco (-1.65%) falling the most. Consumer Staples was the only sector which finished in the green, increasing by 0.95 per cent.

Both New Hope Corporation and News Corporation saw their stock prices fall by 8.61% and 6.88% respectively, making them the worst performing companies in this index.

Quick Singles

• GPT Group (ASX: GPT) share price decreased by 0.2% to $4.50 on the announcement that its CEO, Bob Johnston, will resign.

• AGL Energy Limited (ASX: AGL) share price fell 2.4% to $6.95 following broker downgrades after a poor earnings report on Thursday.

• Jindalee Resources (ASX: JRL) went into a trading halt pending an announcement relating to a memorandum of understanding for joint research on the company's McDermitt lithium project in the United States.

• Kraken has agreed to shut its cryptocurrency-staking operations to settle charges with the U.S. Securities and Exchange Commission (SEC), according to an industry source briefed on the matter

Economic News

According to the latest data released by the US Labor Department, applications for unemployment benefits in the country have risen for the first time in six weeks. Despite this recent increase, the overall numbers remain historically low, highlighting the strength and resilience of the job market.

The data, which was released on Thursday, showed that initial unemployment claims rose by 13,000 to reach 196,000 in the week ending on February 4th. This came as a slight surprise, as a median forecast of economists surveyed by Bloomberg had predicted 190,000 applications.

Despite this recent increase, the overall unemployment rate remains low compared to previous years

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Top Story

RBA Revises Inflation Forecasts and Warns of Unsustainable Wage Demands

The Reserve Bank of Australia (RBA) has revised its inflation forecasts upward, stating that the current wave of rapidly rising prices in the country has likely reached its peak. In response to the strong Consumer Price Index (CPI) number for the December quarter and expectations of faster wage growth, the central bank upgraded its near-term inflation forecasts in its most recent Statement on Monetary Policy, released on Friday.

In a surprisingly hawkish statement, the RBA reiterated that multiple interest rate increases will be required to ensure that the current high inflation is only temporary. As measured by the trimmed mean, inflation is currently running at 6.9 percent but is expected to fall to 4.3 percent by the end of the year, which is lower than the central bank's previous forecast of 3.8 percent.

The RBA warned that high inflation could push workers to make unsustainable wage demands, leading to rapid rates of price growth. In its latest statement, the bank revealed that it now expects wages growth to exceed 4 percent this year, with the retail industry experiencing the fastest growth, partly due to minimum wage increases.

Businesses remain uncertain about the outlook for inflation amid the prospect of another potentially large lift in minimum wages by the Fair Work Commission in the middle of the year. The RBA observed that last June's 5.2 percent increase had passed through to stronger wages growth, with firms in its liaison program saying the outlook for wages growth is dependent on future minimum wage increases.

"Over recent months, firms in a number of industries, particularly market services, have reported that higher labor costs are contributing to price increases; for some of these firms, labor is the most significant component of their costs,” the RBA stated.

Movers and Shakers

✅Biggest Winners

Imugene Limited (ASX: IMU) share price was up 7.4% to $0.15 after announcing that it had been granted a patent in the United States for its lung cancer treatment product, PD1-Vaxx.The PD1-Vaxx is a B-cell activating immunotherapy for non-small cell lung cancer (NSCLC).

Service Stream (ASX:SSM) rose by 6.78% to $0.63 today after reporting unaudited first-half EBITDA from Operations at $54m. The company said that performance at a Group-level has been positive, with a particular standout being the Telco division.

❌ Biggest Losers 

REA Group Limited (ASX: REA) shares fell 2.7% to $121.11 after announcing its first-half results, reporting a net profit of 201.6 million Australian dollars (USD 139.5 million) for the six months ending December, compared to 221.3 million a year prior. The decline in profit is attributed to a 9% drop in Australian residential listings, due to declining property prices from their Covid-driven peaks.

News Corporation (ASX: NWS) share price fell 6.9% to $28.00 after it announced plans to cut around 400 jobs in Australia as part of its global restructuring, which will result in the elimination of 1,250 roles. This move comes after the company reported a 30% drop in operating earnings to $409 million in the three months to December, due to significant decreases in real estate, book publishing, and news revenues.

Small-Cap of the Day

Magnetite Mines Shares Soar 40.7% After Iron Peak Mineral Potential Boost at Razorback Project

Magnetite Mines (ASX:MGT) stock price increased by 40.7% following yesterday's statement that the Iron Peak mineral potential at the company's flagship Razorback Iron Ore project had been significantly enhanced.

The company revealed that mass recovery has increased dramatically from 16.8% to 19.4%, while tonnage has climbed from 419 Mt to 502 Mt.

Magnetite CEO Tim Dobson stated, "MGT has progressively enlarged the size of its flagship Razorback Iron Ore Project over the past few years, developing the long-term, large-scale mine plan required to support investment in accessing South Australia's enormous but unexplored Braemar iron province."

"Now we are focusing on improving product quality to not only improve early-year project economics, but also to target the manufacture of premium-grade DR products, which are in increasing demand by the decarbonizing iron and steel industry."

Economic Outlook

10th February

• US Initial Job Claims (est. 194k)

That's it from the team at ASX-News today. We hope you enjoyed our EOD wrap-up. Good night and happy investing!