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The share market gave up early gains as Chinese growth worries dragged on the dollar and commodity prices.
The S&P/ASX 200 faded to a loss of 49 points or 0.69 per cent. Institutional selling in the closing auction drove the benchmark to its low of the day.
Earlier, the benchmark rallied 26 points as a takeover offer for data sourcing firm Appen fuelled a rebound in beaten-down tech stocks. Sentiment soured as iron ore and copper prices declined in the wake of downbeat comments from China’s Premier.
What moved the market
Concerns about the outlook for Australian raw materials re-emerged after remarks from Premier Li Keqiang suggested the Chinese economy might contract this quarter. Li urged officials to help businesses reopen after Covid lockdowns that have thrown a brake on the economy.
“We will try to make sure the economy grows in the second quarter,” Li said, according to the Financial Times. “This is not a high target and a far cry from our 5.5 per cent goal. But we have to do so.”
Li’s remarks suggested lockdowns have had a bigger impact on growth than previously suspected. Shanghai, the world’s busiest port, is emerging from lockdown after two months.
Parts of Beijing have also faced restrictions, along with dozens of smaller population centres. The capital this morning reported 45 new Covid cases, down from 47 yesterday, but unacceptably high for a government pursuing a zero-Covid policy.
Iron ore fell as much as 4.5 per cent on China’s Dalian Commodity Exchange. As the ASX closed, the loss had shrunk to 1.9 per cent.
Copper eased 0.9 per cent in US electronic trade as the US dollar rose. The Australian dollar dropped 0.41 per cent to 70.6 US cents.
Earlier, tech stocks jumped after Canada’s Telus International launched an opportunistic $1.2 billion bid for tech darling Appen.
Tech was also among the strongest sectors overnight in the US after the Federal Reserve clarified this year’s rates outlook. The Nasdaq Composite rallied 1.51 per cent. The broader S&P 500 gained 0.95 per cent.
Winners’ circle
Artificial intelligence global leader Appen jumped 29.22 per cent to $8.27 after Telus International made an unsolicited, conditional and non-binding indicative offer of $9.50 a share.
The bid represented a 48 per cent premium to yesterday’s closing price, but was still a shadow of Appen’s pandemic-era peak. The share price hit $43.66 in August 2020. Appen’s board said the Canadian firm would have to do better.
“The Board is in discussions with Telus to seek an improvement in the terms of the Indicative Proposal,” the company said.
The company’s shares entered a trading halt after lunch, pending a further announcement in relation to the takeover offer.
The rest of the day’s biggest gains were mostly growth stocks as interest in Appen encouraged value-hunters to re-examine other fallen angels.
Tyro Payments gained 5.05 per cent, City Chic Collective 4.15 per cent and PointsBet 5.04 per cent. Codan added 2.79 per cent, Pro Medicus 2.68 per cent and WiseTech 2.36 per cent.
Westpac edged up 0.13 per cent after transferring the management of its superannuation funds to global professional services provider Mercer. The switch is part of the bank’s drive to simplify its operations and refocus on banking.
The only other heavyweights to advance were Goodman Group +1.29 per cent, Aristocrat Leisure +0.24 per cent and James Hardie +0.11 per cent.
A broker upgrade helped lift testing and certification business ALS 6.08 per cent. Morgan Financial raised its recommendation to ‘Add’ following yesterday’s trading update.
Doghouse
Miners retreated on the threat of lower demand as China’s economy cools. Whitehaven Coal sank 4.73 per cent. Fortescue Metals shed 3.68 per cent, Rio Tinto 1.05 per cent and BHP 0.93 per cent.
Coal miner New Hope declined 7.8 per cent from a two-year high after unseasonal rain and Covid absences affected production in the NSW Hunter Valley.
Champion Iron eased 2.32 per cent during a tough session for miners after reporting a 77 per cent increase in earnings per share last quarter.
Supermarkets Woolworths and Coles were back under pressure following a brief respite yesterday. Woolworths dropped 2.57 per cent and Coles 2.22 per cent.
Retail stocks have struggled since weak outlooks from US giants Target and Walmart underscored the cost pressures facing retailers. Bunnings owner Wesfarmers fell 1.82 per cent.
Other markets
A weak after-hours earning update from Nvidia and falls on Asian markets depressed US futures. S&P 500 futures were recently down 12.5 points or 0.32 per cent.
Hong Kong’s Hang Seng fell 0.78 per cent. The Asia Dow shed 0.5 per cent. Japan’s Nikkei eased 0.2 per cent. Stimulus hopes helped lift China’s Shanghai Composite 0.59 per cent.
Oil continued to edge higher on signs sanctions on Iranian oil will remain as nuclear negotiations with the US stutter. Brent crude firmed 19 US cents or 0.17 per cent to US$111.31 a barrel.
Gold faded US$5.10 or 0.3 per cent to US$1,841.20 an ounce.
