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The share market fell for the first time this week after Sydney reimposed Covid restrictions and China severed a key line of communications with the government.
The S&P/ASX 200 sank 34 points or 0.48 per cent from yesterday’s 14-month closing high.
Nine of eleven sectors retreated. Shrinking gains in commodity stocks were dwarfed by declines in tech stocks, Telstra, Coles and NAB.
What moved the market
A positive start quickly unravelled after the NSW government announced new measures to contain a Covid outbreak. Losses were compounded later in the session by China’s decision to suspend participation in the China-Australia Strategic Economic Dialogue.
Travel and tourism stocks slumped after the NSW Government imposed restrictions on Greater Sydney after two new locally-acquired cases yesterday. Masks will become compulsory on public transport and in public indoor venues from 5pm tonight until mid-day Monday. Indoor gatherings will be restricted to 20 people.
Webjet declined 6.32 per cent, Flight Centre 5.3 per cent, Corporate Travel Management 3.06 per cent and Sydney Airport 1.65 per cent.
The dollar dropped around half a cent before mounting a partial recovery after China ramped up its diplomatic war with Australia by cutting off another line of communication. The latest volley follows the federal government’s decision to scrap Victoria’s Belt and Road agreement with China.
“Based on the current attitude of the Australian Commonwealth Government toward China-Australia cooperation, the National Development and Reform Commission of the People’s Republic of China decides to indefinitely suspend all activities under the framework of the China-Australia Strategic Economic Dialogue,” the Commission posted on a Chinese government website.
However, Jeffrey Wilson, Research Director at the Perth USAsia Centre think tank, said the gambit was largely symbolic and would have little effect on the already strained relationship.
“China has run out of ammunition,” Mr Wilson tweeted. “By going ‘thermonuclear’ on trade in 2020, they now have no substantive ways to punish Aus anymore, and have to scrap around for impact-free acts of pure symbolism.”
The dollar fell from around 77.5 US cents to 77.01 US cents before trimming its loss to 77.4 US cents, a decline of 0.14 per cent.
The market pushed briefly higher in early trade following a record close for the Dow overnight. The blue-chip average rose 0.29 per cent as cyclical stocks outperformed growth sectors. The S&P 500 edged up 0.07 per cent. The growth stock-heavy Nasdaq Composite sank 0.37 per cent.
Winners’ circle
For much of the session the miners fought a lonely struggle against the sinking tide after copper hit a decade high and iron ore pushed towards record levels. BHP rallied 2.13 per cent, Fortescue Metals 0.13 per cent and Rio Tinto 0.98 per cent. South32 gained 1.02 per cent.
Woodside and Oil Search were the pick of the energy majors, rising 0.78 and 1.3 per cent, respectively. Santos gained 0.57 per cent. Beach Energy dropped 1.17 per cent.
Insurer QBE rallied 3.16 per cent to an eight-month peak following yesterday’s upbeat AGM. Rival IAG was the index’s third-best performer behind QBE and BHP, rising 1.98 per cent.
Doghouse
NAB shares fell 2.96 per cent after CEO Ross McEwan warned the outlook remained challenging for many customers.
“Risks do remain,” he said. “The recovery is not even, and some customers such as those in international travel and hospitality, particularly in CBD areas, still face significant challenges.”
The bank unveiled a 94.8 per cent rebound in half-year cash earnings to $3.343 billion compared to the same period in FY2020. Statutory net profit increased 144 per cent to $3.208 billion. The bank will pay an interim dividend of 60 cents per share fully franked.
The rest of the big four followed NAB lower before CBA and Westpac reversed course. CBA closed 0.24 per cent ahead. Westpac added 0.23 per cent. ANZ fell 0.9 per cent. The financial sector has had a stellar run lately, yesterday reaching its strongest level since the start of the pandemic meltdown.
The tech sector has been under pressure for a week amid a resurgence of inflation concerns. The sector fell 3.6 per cent to its lowest level in about five weeks. Afterpay shed 6.97 per cent, Nanosonics 3.65 per cent and Altium 3.2 per cent.
Appen plumbed its weakest level in more than two years after warning the company faced a number of headwinds, including a rising dollar, greater competition and the lingering effects of Covid. CEO Mark Brayan told the Macquarie Australia Conference revenue grew 12 per cent last year to $599.9 million.
“This is solid growth on any measure but not to our usual standards,” he said. The share price slid 21.1 per cent to a level last seen in December 2018.
Nearmap unwound yesterday’s 14 per cent rally plus some more after announcing it faced legal action in the US over alleged patent infringement. A complaint was filed against the aerial mapping group’s US subsidiary relating to roof-estimation technology. Nearmap said the claim was “without merit” and did not affect its core proprietary technology. The share price slumped 23.31 per cent.
Qantas faded 1.46 per cent to a ten-week low after the Australian Competition & Consumer Commission (ACCC) said it intended to deny the airline permission to coordinate flights with Japan Airlines. ACCC Chair Rod Sims said the proposed agreement breached competition laws. The airline also announced it will retain its headquarters in Sydney (Qantas) and Melbourne (Jetstar) following a review.
A trading update sent Adore Beauty to a new low. Shares in the beauty e-tailer which hit $7.42 upon listing last October fell as low as $3.65 after the company said active customers had declined since its last update. Despite the setback, the retailer was on track for full-year revenue growth of 43 – 47 per cent. The share price ended down 19.21 per cent at $3.70.
Star Entertainment slid 2.99 per cent after telling today’s Macquarie Australia Conference trading continued to be impacted by Covid operating restrictions. Total domestic gaming revenue declined 24 per cent over the last half.
Other markets
A mixed session on Asian markets saw the Asia Dow climb 1.02 per cent. China’s Shanghai Composite eased 0.09 per cent and Japan’s Nikkei added 1.79 per cent as trade resumed following a three-day holiday. Hong Kong’s Hang Seng put on 0.38 per cent
US futures inched higher. S&P 500 futures were recently up two points or 0.05 per cent.
Brent crude overcame early weakness to advance 21 cents or 0.3 per cent to US$69.17 a barrel. Gold rallied $7.70 or 0.43 per cent to US$1,792 an ounce.
