The share market slipped to its third loss in four sessions as trade woes weighed on resource stocks.
The S&P/ASX 200 declined 29 points or 0.4 per cent, reversing yesterday’s 18-point advance. Earlier, the index fell to its lowest level in more than a week as soft leads from the US were compounded by escalating tensions with China.
What moved the market
Coal stocks tumbled after Chinese media confirmed a ban on Australian imports, the latest volley in a one-sided trade war. Coronado Global Resources slumped 10 per cent, Yancoal 8.4 per cent, Whitehaven Coal 5.9 per cent and New Hope 2.7 per cent.
Trade Minister Simon Birmingham said the government had not received formal notice of a ban, but was “deeply troubled” by the reports.
“They, if true, would indicate discriminatory trade practices being deployed by Chinese authorities and we would urge them to rule that out swiftly,” he told ABC radio.
Iron ore producers retreated after Chinese steelmakers called for an inquiry into the recent run-up in prices. The spot price for ore hit a nine-year high on Friday before reversing almost 4 per cent yesterday. Prices have run hard this year due to strength in Chinese demand, as well as Covid-related supply issues in Brazil, Australia’s major competitor.
“China Iron & Steel Association called on the China Securities Regulatory Commission to crack down on illegal activities in the market,” ANZ economist Felicity Emmett said. “Nevertheless, the falls were contained by expectations of strong demand.”
Fortescue Metals shed 3.1 per cent, BHP 2.3 per cent and Rio Tinto 1.3 per cent.
The S&P 500 fell 0.44 per cent overnight as the threat of more lockdowns outweighed optimism as hospitals began vaccinating and a stimulus deal inched nearer.
Investors rotated out of mining stocks into traditional defensive sectors, including healthcare, REITs and consumer staples. The best performers at the heavyweight end of the market were property group Goodman +2.2 per cent and supply logistics expert Brambles +1.5 per cent. Pokie-maker Aristocrat gained 1.2 per cent, health giant CSL 1.2 per cent and toll road operator Transurban 1.1 per cent. Supermarket Coles put on 0.6 per cent.
Further down the food chain, Collins Foods gained 2.4 per cent, SCA Property 3.1 per cent and Abacus Property 1.7 per cent. A2M Milk added 0.9 per cent.
Accounting software firm Xero advanced 2.5 per cent to a record close following its addition to the S&P/ASX 50 index. Wesfarmers also hit an all-time high before trimming its gain to 0.1 per cent. The retail conglomerate is expected to be a big winner from strength in the dollar, which makes it less expensive to bring in product from overseas.
Diversified services provider Downer EDI tacked on 2.3 per cent after selling its open cut mining business in WA to contract miner MACA Limited in a deal worth more than $200 million.
While the miners were the biggest losers at the top end of the market, the banks also fell as good news for shareholders was lost in the general downbeat mood. The regulator, APRA, lifted restrictions on dividend payments imposed during the pandemic. The move clears the way for higher payouts next year. CBA declined 1 per cent, ANZ 0.9 per cent, NAB 0.7 per cent and Westpac 0.5 cent.
Other heavyweight drags on the index included Woodside Petroleum -2.1 per cent, Newcrest -0.5 per cent and Telstra -0.3 per cent.
Mesoblast skidded 15.2 per cent following disappointing results from a late-stage trial of its treatment for chronic heart failure. While the treatment showed a 60 per cent reduction in heart attacks and strokes, the trial failed to meet its primary endpoint.
Trade in Westgold Resources was halted after operations at the company’s Big Bell mine were suspended pending an investigation into an incident involving an employee. Shares sank 5.6 per cent before the halt.
US futures unwound gains earlier in the day as the mood on Asian markets soured. China’s Shanghai Composite fell almost 0.5 per cent, Hong Kong’s Hang Seng almost 0.7 per cent and Japan’s Nikkei 0.4 per cent. S&P 500 futures were lately back at break-even after being up 0.2 per cent.
Oil retreated from a nine-month peak. Brent crude sank 37 cents or 0.7 per cent to $US49.92 a barrel. Gold rallied $6.40 or 0.3 per cent to $US1,838.50 an ounce as risk assets deteriorated and havens attracted buying.
The dollar fell 0.33 per cent to 75.1 US cents.
Hot today and not today
Hot today: A strong session for IPOs saw iron ore explorer Akora Resources (ASX:AKO) surge more than 50 per cent on debut and lender Liberty Financial (ASX:LFG) lift its market value above $2 billion. Akora is developing several projects in Madagascar. Shares that were offered in the float at 25 cents went for twice that price on-market before closing 56 per cent higher at 39 cents. Liberty passed the $2 billion mark as investors bought in for a piece of the non-bank lender’s forecast profit growth of 17 per cent. Shares closed 16.7 per cent ahead at $7.
Not today: Retail Food Group (ASX:RFG) briefly lost a quarter of its value after the consumer regulator accused the food franchisor of misleading franchisees. The Australian Competition and Consumer Commission launched proceedings in the federal court against the company. The regulator said the company withheld important information from incoming franchisees and made false or misleading statements about the viability of 42 operations between 2015 and last year. The group manages and operates the Gloria Jean’s, Brumby’s, Donut King and Michel’s Patisserie brands. Shares sank as low as 6.8 cents before an afternoon buying spree trimmed the loss to 6.6 per cent at 8.5 cents.