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Records for market heavyweights BHP and Wesfarmers helped power the ASX to a new peak before souring US futures dragged the index back to break-even.
A fourth straight advance proved a bridge too far during a wider retreat from risk on financial markets. The S&P/ASX 200 touched an all-time high of 7417.6 before fading to a loss of a tenth of a point or less than 0.1 per cent.
There were new highs for BHP, Wesfarmers, ResMed, Sonic Healthcare and Mineral Resources. Afterpay, Telstra and the high-street banks declined.
What moved the market
A bullish open gave way to a gentle, session-long retreat as risk assets from Asian equities to oil to US futures declined. Shares in mainland China and Hong Kong fell more than 2 per cent after tighter government regulation weighed on education and property stocks. The Shanghai Composite skidded 2.5 per cent, touching a two-month low. The Hang Seng fell 3.22 per cent to its weakest level of the year.
“We believe China’s economy, and specifically its financial system, will face significant risks in coming months due to the unprecedented tightening measures applied to the property sector,” economists at Nomura wrote.
US futures retreated ahead of a huge week of corporate earnings. S&P 500 futures slid 13 points or 0.3 per cent. The major indices closed at fresh highs on Friday. The S&P 500 gained 1.01 per cent. The Dow climbed 0.68 per cent, closing above 35,000 for the first time.
Earlier, the ASX followed Wall Street into record territory as bulk metal miners shrugged off iron ore’s worst weak since February 2020 and a host of companies traded at fresh highs.
The market ignored signs lockdowns were starting to affect the profit outlook in pockets of the market. Commercial property giant GPT withdrew its full-year guidance, citing the impact of lockdowns in Sydney and Melbourne. Shares in the diversified property owner dropped 2.74 per cent to an eight-week low.
David Bassanese, Chief Economist at BetaShares, said investors were looking beyond current lockdowns to the economic rebound expected to follow next quarter.
“Q3 GDP is now shaping up to be downright ugly, yet markets have learnt to look through the weakness and focus on the likely Q4 re-opening. Such sentiment will be supported by the fact that the RBA now seems even less likely to taper its bond purchases in September.
“The good news is that states other than NSW could emerge from lockdowns within days if not a week or so,” he added. “In NSW, where the virus has had more time to spread, the outlook remains bleak – zero community delta transmission and a ‘soft lockdown’ appear incompatible goals, and until either one is forsaken Sydney’s lockdown risks dragging on indefinitely.”
Winners’ circle
BHP showed no ill effects from iron ore’s worst week since the start of the pandemic. The Big Australian edged up 1.25 per cent to a record after the ore price held above US$200 a tonne on Friday. Rio Tinto climbed 2.37 per cent, Fortescue Metals 0.67 per cent and Champion Iron 3.4 per cent.
Retail and industrial conglomerate Wesfarmers rallied 0.6 per cent to a seventh straight record close. Also trading at new highs were ResMed +0.51 per cent and Mineral Resources +1.57 per cent. Sonic Healthcare finished flat at $40.10 after rising as high as $40.65.
A record quarter lifted rare earths miner Lynas 10.58 per cent to an eight-year high. Sales revenue increased to $185.9 million from $110 million the previous quarter. Receipts jumped to $192 million from $133 million.
Women’s clothing retailer City Chic Collective climbed 6.65 per cent to a record on news it will acquire European plus-size e-tailer Navabi for $9.6 million in cash. CEO and MD Phil Ryan said the acquisition gave the company a foothold in the European plus-size market. The retailer also reported a 32.9 per cent increase in full-year sales revenue.
Best & Less began life as a listed entity with a rise of 11.11 per cent. Shares issued at $2.16 this morning closed at $2.40.
Doghouse
AMP declined 1.38 per cent after announcing it would surrender ownership of clients to financial advisers. The change would allow advisers to take their clients with them if they severed their relationship with the wealth manager. The company said the new model prioritised clients and gave advisers increased flexibility.
Most of the big four banks retreated with bond yields. The yield on ten-year Australian government bonds eased more than a basis point back under 1.2 per cent. ANZ dipped 0.07 per cent, NAB 0.38 per cent and Westpac 0.36 per cent. CBA edged up 0.02 per cent.
Gold stocks dragged following the yellow metal’s first weekly loss in five weeks. Silver Lake Resources shed 8.05 per cent, Ramelius 3.79 per cent and Newcrest 1.57 per cent.
Crown Resorts dropped 5.19 per cent after the WA Government sought more time to complete a Royal Commission into the Perth casino. The projected timeline has been extended from mid-November to March next year so the Commissioners can assess the findings of the Victorian Royal Commission.
Boral ended flat after announcing it will sell its Australian timber business to Allied Natural Wood Enterprises for $64.5 million. The sale price was “broadly in line” with its carrying value.
Other markets
Oil started the week on the back foot as part of a broader retreat from risk. Brent crude declined 66 US cents or 0.9 per cent to US$73.44 a barrel.
Gold climbed US$6.70 or 0.37 per cent to US$1,808.50 an ounce.
The dollar eased 0.22 per cent to 73.51 US cents.
