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Australian shares finished off their lows after the Reserve Bank left official rates on hold and reaffirmed its faith in an economic rebound as lockdowns are lifted.
The S&P/ASX 200 slashed an initial loss of 78 points to 30 points or 0.41 per cent.
A seven-year high in US crude boosted energy stocks. Tech stocks fell after the Nasdaq Composite tumbled more than 2 per cent. Iron ore miners eased as soft export data raised doubts about their earnings prospects.
What moved the market
The market finished near its high for the day after the RBA left its policy settings unchanged and predicted the economy would regain momentum in the months ahead.
“As vaccination rates increase further and restrictions are eased, the economy is expected to bounce back,” Governor Philip Lowe said.
“There is, however, uncertainty about the timing and pace of the bounce-back and it is likely to be slower than that earlier in the year,” he added. “In our central scenario, the economy will be growing again in the December quarter and is expected to be back around its pre-Delta path in the second half of next year.”
The bank left the cash rate at a record-low 0.1 per cent for an 11th month and reiterated its intention to buy $4 billion of government bonds each week until at least mid-February. The bank also reiterated its conviction that conditions for raising rates will not be met until 2024.
“Wage and price pressures remain subdued in Australia,” Mr Lowe said. “In underlying terms, inflation is running at around 1¾ per cent and wages, as measured by the Wage Price Index, are increasing at just 1.7 per cent. While disruptions to global supply chains are affecting the prices of some goods, the impact of this on the overall rate of inflation remains limited.”
The market fell sharply in morning trade following a losing night on Wall Street. The Nasdaq Composite sank 2.14 per cent overnight as the big five – Apple, Microsoft, Amazon, Alphabet and Facebook – all dropped at least 2 per cent. The S&P 500 lost 1.3 per cent and the Dow 0.94 per cent.
Winners’ circle
Energy stocks were the session’s big winners after the Organization of the Petroleum Exporting Countries (OPEC) and allies stared down calls for a major increase in production to rein in soaring energy prices. The oil cartel stuck to a previously-announced plan to increase crude production modestly each month.
Oil traders responded by lifting US crude to a seven-year high. West Texas Intermediate climbed US$1.74 or 2.3 per cent to US$77.62 a barrel. The global benchmark, Brent crude, rose US$1.98 or 2.5 per cent to US$81.26 a barrel, its highest settlement in three years. The US energy sector jumped 1.6 per cent.
The Australian energy sector flew up 2.44 per cent to a level last seen in January. Oil Search climbed 2.3 per cent, Santos 2.54 per cent, Woodside Petroleum 3.98 per cent and Beach Energy 0.7 per cent.
Whitehaven Coal rose 2.37 per cent towards a two-year high after China’s energy crisis drove thermal coal to record levels. New Hope rose 1.23 per cent.
“Thermal coal prices surged to their highest level on record amid energy shortages in China,” commodities strategist Daniel Hynes of Hynes Commodities said. “High quality thermal coal loaded in the Newcastle port hit USD203/t. Earlier this week Chinese Vice Premier, Han Zheng, ordered state-owned energy companies to secure supplies at any costs.”
Aside from the major movers at the two extremes – energy up, tech down – the day’s action suggested a stock-picker’s market. Woolworths gained 1.11 per cent. Coles finished flat.
CBA rose 0.32 per cent and Macquarie Bank 0.17 per cent. ANZ dropped 0.71 per cent, NAB 0.07 per cent and Westpac 0.54 per cent.
A broker upgrade from Jefferies helped limit Sonic Healthcare’s fall to 0.08 per cent. The rest of the healthcare heavyweights weakened. Fisher & Paykel sagged 3.6 per cent, Ramsay 1.17 per cent and CSL 0.23 per cent.
The utilities sector firmed for a second day. Origin Energy climbed 2.64 per cent, AusNet 1.18 per cent and APA Group 0.23 per cent.
Gold was another pocket of strength following a third straight advance in the precious metal overnight. Gold Road Resources put on 7.23 per cent, St Barbara 5.67 per cent, Regis 4.35 per cent and Newcrest 1.26 per cent.
Evolution Mining advanced 2.49 per cent after announcing Navarre Minerals will purchase Evolution’s Mt Carlton gold mine for $90 million. Payment will be a mix of cash and equity. The mine represents 1.5 per cent of Evolution’s gold mineral resources.
Doghouse
The tech sector slumped almost 3 per cent to its weakest in two months as long-term interest rates hit their highest since early July. The yield on ten-year Australian government bonds firmed three basis points to 1.528 per cent. Tech stocks are particularly vulnerable to higher rates due to the way they are valued on borrowing to fund future growth.
Appen declined 5.03 per cent, Afterpay 5.02 per cent, Nearmap 3.69 per cent and Altium 3.63 per cent. Z1p Co shed 4.82 per cent, HUB24 4.36 per cent and Tyro Payments 4.36 per cent.
Iron ore producers declined after August trade figures showed an unexpected 4 per cent decline in ore exports. Fortescue Metals fell 1.25 per cent, BHP 1.14 per cent and Rio Tinto 0.38 per cent.
The speculative end of the market weathered the September decline better than the big end until this session. The S&P/ASX Emerging Companies Index sank 1.41 per cent to a two-week low.
Other markets
Asian markets pared falls as the session advanced. Japan’s Nikkei was lately down 2.36 per cent after earlier falling more than 3 per cent. Hong Kong’s Hang Seng flipped a loss of more than 1 per cent into a gain of 0.32 per cent. The Asia Dow trimmed its fall to 0.95 per cent. Trade in China was suspended until Friday for Golden Week.
US futures steadied as Asian markets pared losses. S&P 500 futures were lately up three points or 0.06 per cent.
Oil added to overnight gains. Brent crude firmed 17 US cents or 0.2 per cent to US$81.43 a barrel.
Gold backed down US$8.40 or 0.5 per cent to US$1,759.20 an ounce.
The dollar faded 0.34 per cent to 72.64 US cents.
