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The share market closed at its weakest since mid-January as a challenging earnings season neared its end and after inflation worries tanked Wall Street.
The S&P/ASX 200 slumped 82 points or 1.12 per cent to 7224.8.
Mining, property and consumer stocks spearheaded selling following unexpectedly “hot” US inflation data on Friday. Woodside Energy and TPG Telecom rose on a day when earnings misses outweighed beats.
What moved the market
A dire month for investors rolled towards a negative conclusion as financial markets continued to adjust to the prospect of interest rates going significantly higher and staying there for longer. US stocks tumbled on Friday after a rebound in inflation prompted interbank futures to revise higher the peak or terminal rate of this rates cycle.
The S&P 500 dropped 1.05 per cent. The fall sealed the index’s worst weekly return of the year, a loss of 2.7 per cent.
Investors now expect the federal funds rate target to reach 5.4 per cent by July, up from a current range of 4.5-4.75 per cent. The rates outlook has also darkened here, with interbank futures now implying up to four more increases by September, starting when the Reserve Bank meets next week.
The ASX 200 has given up roughly two-thirds of its January advance, closing today where it was in the second week of the year. With a session to go, the index is on track for a monthly loss of almost 3.4 per cent.
“The latest round of hotter-than-expected U.S economic data has added to concerns that the U.S economy is not slowing enough to allow the Fed to end its rate-hiking cycle. A similar story is also playing out in Australia as hotter-than-expected inflation data push the RBA towards extending its own tightening cycle,” IG market analyst Tony Sycamore said.
“The ASX200’s disappointing performance in February, compounded by an earnings season skewed towards earnings misses rather than beats and forward guidance, particularly from consumer-facing companies that suggest more challenging times lay ahead.”
Winners’ circle
Woodside Energy rallied 1.53 per cent after higher gas and oil prices last year inflated its full-year net profit by 228 per cent to $6.5 billion. Operating cash flow increased by 132 per cent following a merger with BHP’s petroleum business. Shareholders will receive a bumper final dividend of US$1.44 per share.
“Our net profit after tax rose on the back of the increased production and sales delivered by the expanded portfolio and higher global prices for our products. In 2022 our realised price rose 63% year-on-year to $98.4 per barrel of oil equivalent,” CEO Meg O’Neill said.
TPG Telecom popped 5.93 per cent after subscriber gains helped supercharge its full-year profit. The company gained 300,000 new mobile subscribers last year. Net profit jumped to $513 million from $113 million in FY21 as the telco added subscribers and accounted for the sales of tower assets.
The promise of a return to profitability lifted online retailer Kogan 2.34 per cent. The company said it turned earnings positive last month after slashing an inventory overhang. Total inventories declined 38 per cent to $98.3 million.
Dalrymple Bay Infrastructure firmed 1.64 per cent after reporting a statutory full-year net profit of $69 million.
Doghouse
A full-year guidance downgrade knocked Downer EDI down 23.74 per cent. The engineering group cut its underlying net profit forecast for a second time to $170-$190 million from revised guidance of $210-$230 million. The downgrade followed the discovery of historical misreporting of revenue in a maintenance contract.
Funeral home operator InvoCare swung to a $1.8 million full-year loss as volatility on financial markets fuelled unrealised mark-to-market losses on client funds for pre-paid funerals. The unexpected loss overshadowed a 12 per cent rise in operating revenues as Covid restrictions on funeral services were lifted. The share price was punished with a loss of 10.85 per cent.
Pathology and data imaging firm Healius declined 4.1 per cent after scrapping its interim dividend to preserve cash. The company delivered an underlying first-half net profit of $8.1 million, but a reported net loss of $28.7 million.
Fortescue Metals was among today’s biggest drags, falling 7.26 per cent as its shares traded without the right to a 75 cents-per-share dividend. Fellow ore miners BHP and Rio Tinto slid 3.03 and 2.91 per cent, respectively.
Also trading ex-dividend were Aurizon -3.58 per cent, Santos -1.71 per cent and Beach Energy -2.41 per cent.
Appen sank 14.18 per cent after scrapping its full-year earnings outlook. The AI data firm warned it expected its first half to be “materially lower” than 1H22.
Uranium laser enrichment specialist Silex tumbled 23 per cent to $3.95 after raising $120 million from institutional investors at $4.05 per share.
Lynas Rare Earths slid 6.24 per cent after water supply issues and increased costs dented its first-half profit. Net profit after tax eased to $150.1 million from $156.9 million in 1H22.
Beleaguered beauty and wellness firm BWX skidded 12.77 per cent after announcing the departure of CEO and Managing Director Rory Gration as its first-half net loss blew out to $100.8 million. Revenues declined 18.4 per cent from the prior corresponding period.
Other markets
US futures edged higher in Sunday night trade. S&P 500 futures climbed five points or 0.13 per cent.
The Asia Dow gave up 0.43 per cent, China’s Shanghai Composite 0.12 per cent, Hong Kong’s Hang Seng 0.75 per cent and Japan’s Nikkei 0.18 per cent.
Oil slid towards its eighth loss in nine sessions. Brent crude declined 30 US cents or 0.36 per cent to US$82.52 a barrel.
Gold added to Friday’s losses, falling US$1.90 or 0.1 per cent this afternoon to US$1,815.20 an ounce.
The Australian dollar eased 0.34 per cent to 67.1 US cents after losing almost a cent on Friday.
