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ASX 200 morning report – Z1P & BXB in focus, interest rates on hold until 2024

The S&P/ASX 200 (ASX: XJO) experienced a choppy session on Tuesday, initially falling 0.4%, before trading 0.5% higher but ultimately closing with a gain of just 12 points.

Energy sector surprise

Six of the 11 major sectors were higher, led by energy which had its strongest day in seven months, gaining 4.4%.

An oil price surge above US$70 per barrel was the primary driver with Woodside Petroleum Limited (ASX: WPL) and Beach Energy Ltd (ASX: BPT) adding 6.2% and 7.2%, and Origin Energy Ltd (ASX: ORG) also gaining 3.2% as it will benefit from the translation into domestic gas prices.

RBA spurs turnaround

But it was all about the Reserve Bank on Tuesday after Governor Lowe shocked economists and traders betting on a rate hike to occur earlier than expected. Lowe outlined some confidence in the economic recovery once vaccination rates are higher but flagged growing concerns of the damage to small businesses as a potential risk.

He highlighted the very different wage and inflation environment in Australia and reiterated that the cash rate will remain on hold at 0.1% until at least 2024.

Amid a growing chorus of ‘experts’ suggesting rates will increase in 2022 or 2023, he commented: “these expectations are difficult to reconcile with the picture I just outlined and I find it difficult to understand why rate rises are being priced in 2022 and 2023”.

The financials sector gained 0.4% on the comments which are likely to support residential property for the foreseeable future.

Zip’s crypto bet

Zip Co Ltd (ASX: Z1P) shares fell 2.7% despite joining the ‘crypto’ party. The group’s US CEO announced it will embrace the “Millennial Finance Diet” and will begin offering the option for registered users to settle and spend using cryptocurrencies including Bitcoin.

Featured: Henrik Andersson and the case for crypto

Management highlighted surveys suggesting two-thirds of customers were more likely to use crypto in their daily lives to justify the inclusion of functionality to allow buying, selling and holding crypto tokens on their US app. Zip will also open this functionality to its 15,000 merchants in the country. Pushing back at short-sellers, the CEO said, “our growth will ultimately vindicate us”.

Brambles smashed on downgrade, Uniti halted on insider trading

Brambles Limited (ASX: BXB) was the worst-performing ASX 200 stock, falling 8.3% after management reported profit growth would slow to just 1-2% in FY22.

Management indicated that the company had been “too focused on short-term performance goals” and had been underinvesting in their business.

The company flagged US$90 million in transformation costs as it seeks to digitise its business like the many other seeking to do the same in 2021, with the likes of SAP and Microsoft (NASDAQ: MSFT) likely beneficiaries in my view.

Meanwhile, fast-growing roll up Uniti Group Ltd (ASX: UWL) fell 5% and entered a trading halt after director Vaughan Bowen of Vocus fame was charged with insider trading relating to 2019.

ASX 200 today

The ASX 200 is set to fall at the open on Wednesday, following a negative lead from US markets overnight. Apple (NASDAQ: AAPL) shares are making headlines after the company unveiled its latest iPhone, new Apple Watch and revamped iPads. To find out more, check out Rask Media’s US stock market report.

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Disclosure: At the time of publishing, Drew owns shares in Zip Co.