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The share market pared a winning week after the price of the nation’s most valuable export fell sharply and a horror run for US Big Tech continued with an earnings miss from Amazon.
The S&P/ASX 200 declined 59 points or 0.87 per cent to its first loss in five sessions. The fall trimmed the Australian benchmark’s tally for the week to 109 points or 1.6 per cent.
Mining heavyweights BHP, Rio Tinto and Fortescue Metals booked heavy losses as iron ore prices continued to unravel in China. The tech sector sank as a soft trading update from Amazon pressured Nasdaq futures.
Gains in utilities, industrials and banks cushioned the index from a deeper loss.
What moved the market
A strong week for Australian equities ended on a soft note as the heavily-weighted miners sold off. Fortescue Metals skidded 8.15 per cent after iron ore fell in Singapore to its lowest since May 2020. BHP lost 5.02 per cent. Rio Tinto shed 4.37 per cent. Grange Resources plunged 17.12 per cent.
Prices continued to fall in China this afternoon. The most traded ore contract on the Dalian Commodity Exchange lost 4.1 per cent.
Tech stocks struggled as a challenging reporting season for US Big Tech continued. Overnight, Facebook’s owner, Meta Platforms, lost a quarter of its value after missing earnings expectations. The fall helped pull the S&P 500 down 0.61 per cent and the Nasdaq 1.63 per cent.
The problems for Big Tech continued with a negative reaction to a trading update from Amazon released shortly after the close of regular US trade this morning. The retailer’s shares tanked 12.73 per cent, dragging US equity futures lower.
S&P 500 futures dropped 20 points or 0.53 per cent. Nasdaq futures shed 0.82 per cent.
The ASX extended its losses after a report this morning showed wholesale inflation accelerated last quarter. The Producer Price Index increased by 1.9 per cent. Over the last 12 months prices rose by 6.4 per cent, up from 5.6 per cent the previous quarter.
“The predominant theme in the market is inflation, and all other data hold little significance for investors. As prices have yet to show any signs of cooling, the global equity market has become nothing but a playground of confused emotions, where a modest rally for a few days can uplift the spirit, but it is so far failing to build on the momentum,” Kunal Sawhney, chief executive of research group Kalkine, said.
“The ASX rallied for the past few sessions, but the last couple of bad days experienced on Wall Street are now weighing on investors’ sentiment globally. By next week, the investors might completely forget that the ASX 200 had a strong rebound, and the Fed’s monetary policy stance could serve as the overriding sentiment.”
Both the Federal Reserve and Reserve Bank meet next week. The Fed is widely expected to raise the target federal funds rate by 75 basis points. Investors hope recent data will encourage the central bank to indicate plans for a smaller increase in December.
Until this week the RBA was expected to increase the cash rate target by 25 basis points to 2.85 per cent. However, this week’s unexpectedly hot consumer and wholesale inflation data have put a 50 bp hike back on the table.
Winners’ circle
The major banks shielded the market from a deeper fall. Westpac firmed 0.93 per cent, ANZ 0.88 per cent, CBA 0.78 per cent and NAB 0.31 per cent. Other heavyweight gains included Transurban +2.16 per cent, James Hardie +1.42 per cent and Woolworths +0.68 per cent.
Vicinity Centres gained 4.28 per cent after reaffirming full-year earnings guidance. CEO and Managing Director Grant Kelley said he was “cautiously optimistic” consumer spending will weather recent rate hikes.
Casino operator SkyCity Entertainment rose 4.1 per cent on news first-quarter earnings were 10 per cent higher than before Covid.
Property group Mirvac announced Campbell Hanan will step into the role of CEO and Managing Director next year, replacing the retiring Susan Lloyd-Hurwitz. The share price firmed 2.3 per cent.
Engineering group Downer EDI inched up 0.23 per cent after winning a road maintenance contract in Victoria worth $490 million.
Neo-bank Judo Capital finished flat after making a larger profit last quarter than all of last fiscal year. The company reported a profit of $23 million before tax for the first quarter, beating last year’s full-year proforma profit of $15.6 million.
Doghouse
Macquarie Group eased 0.02 per cent from a five-week high after reporting an interim net profit of $2.305 billion. The firm’s assets under management increased by 3 per cent.
ResMed fell 5.01 per cent despite meeting first-quarter analyst expectations. The respiratory disorder specialist reported diluted earnings per share of US$1.51, in line with the consensus. Revenues increased by 5 per cent to US$950.3 million.
Silver Lake Resources shed 8.23 per cent after warning of a “challenging” operating environment. The gold miner said first-quarter operations were impacted by labour shortages, absenteeism and supply-chain issues. Production would be weighted to the second half.
Pinnacle Investments sagged 3.58 per cent after UBS slashed its earnings outlook for the asset manager.
Kelsian eased 2.59 per cent after acquiring a family-owned Perth bus company for $23.4 million, plus a possible $7 million in earn-outs.
BrainChip plunged 21.18 per cent after the loss-making artificial intelligence chip-maker generated just US$118,000 in revenue in the first quarter. The company reported operating cash outflows of US$3.828 million, leaving US$24.6 million in cash.
Other tech stocks to feel the heat from this week’s disappointing US results included Megaport -4.99 per cent, NextDC -3.94 per cent and Xero -2.75 per cent.
The promise of a special dividend briefly helped raise Mayne Pharma. The company intends to return up to $113 million to shareholders through a special dividend and a pro rata return of capital. The miner’s shares faded to a loss of 1.79 per cent after earlier rising 7.1 per cent.
Other markets
A red afternoon on Asian markets saw the Asia Dow lose 0.98 per cent, China’s Shanghai Composite 0.83 per cent, Hong Kong’s Hang Seng 2.32 per cent and Japan’s Nikkei 0.59 per cent.
Oil backed off a three-week high. Brent crude eased 68 US cents or 0.7 per cent to US$96.28 a barrel.
Gold edged up US$2.80 or 0.17 per cent to US$1,668.40 an ounce.
The dollar bounced 0.27 per cent to 64.68 US cents.
