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ASX 200 set to open higher – HSN & ASX gold shares in focus

The ASX 200 (ASX: XJO) is set to open higher on Thursday according to the latest SPI futures. Here’s what’s making headlines.

Technology recovers, financials finish lower

The S&P/ASX 200 couldn’t capitalise on the strong lead from US technology stocks overnight, falling 0.5% on Wednesday as the lack of growth opportunities came to the fore.

Afterpay Ltd (ASX: APT) returned to strength, jumping 7.5% after announcing the completion of its acquisition of Pagantis, a BNPL provider with a European presence.

All eyes, however, were on the AFR’s Business Summit this week where RBA Governor Phillip Lowe was delivered a much-anticipated speech. The controller of monetary policy noted that the market was now predicting a spike in inflation and effectively pricing two interest rate hikes in the next 12 to 18 months.

Lowe was quick to dismiss this suggestion, confirming that the RBA’s eyes are firmly fixed on wage growth and a return to full unemployment, remaining committed to keeping the cash rate near zero for at least the next few years.

The result was a sell-off in interest rate sensitive businesses, with the financial sector falling 1.3%, led by the Commonwealth Bank of Australia (ASX: CBA), on the basis that net interest margins will remain challenged.

Gold on a roll, Hansen share price flies

It has been a difficult start to 2021 with the increasing popularity of cryptocurrency, a strong AUD and a spike in bond rates all sending the gold price lower. Yesterday saw a reversal of that trend, with the gold price jumping significantly on the threat of at least a short-term burst of inflation.

Silver Lake Resources Limited (ASX: SLR) and Ramelius Resources Limited (ASX: RMS) were two of the key beneficiaries, adding 7.3% and 9.8%, respectively. The opportunity for gold remains positive despite the recent underperformance as the economic recovery gained traction.

The iron ore price fell 6% overnight, with Fortescue Metals Group Limited (ASX: FMG) and Rio Tinto Limited (ASX: RIO) feeling the brunt falling 8.3% and 5.5%, respectively.

Hansen Technologies Limited (ASX: HSN) upgraded earnings expectations by around 38%, sending the share price 24.3% higher. The billing and data management provider flagged a major deal with Telefonica Germany on a prepaid subscription as the driver of the upgrade.

Dow Jones hits record high, inflation muted

The Dow Jones hit a record high above 32,000 points, jumping 1.5% on signs that inflation was a little further away than predicted.

This came at the same time that the Nasdaq remained in a correction (being a 10% market fall), down 0.1% this morning and the S&P 500 up 0.6%. According to Barron’s, this is the first time in 20 years that the divergence in these indices has been so large.

The driver of sentiment was the passing of the stimulus bill to the White House for rubber stamping by President Biden in addition to a weaker than anticipated inflation result.

According to data providers, US inflation rose just 0.4% in February, from 0.3% in January, but when volatile food and energy prices are stripped out, the rise was just 0.1%. On an annual basis, the rate was just 1.3%, well below the target range of the Federal Reserve and therefore not sufficient to warrant any change in policy.

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Disclosure: At the time of publishing, the author of this article does not have a financial or commercial interest in any of the companies mentioned.

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Wattle Partners is a financial advice firm, servicing clients around Australia, specialising in retirement planning (pre and post retirement). 

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