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The post-election rally in equities, supercharged by Pfizer’s vaccine breakthrough, suffered its first setback today.
The S&P/ASX 200 hit an eight-month peak before fading to a loss of 31.5 points or 0.5 per cent as declines in utilities, banks and miners outweighed gains in Telstra, tech and health stocks.
Today’s loss was the first since US Election Day and only the second in nine sessions that saw the index average more than a percentage point of gains each day.
What moved the market
The first cracks in a week-long global rally appeared in the US overnight as the Dow Jones Industrial Average failed to keep pace with gains on the Nasdaq and S&P 500. The blue-chip index dipped 23 points or 0.08 per cent as the “rotation rally” out of growth stocks in cyclicals faltered. The Nasdaq composite put on 2.01 per cent and the S&P 500 0.77 per cent. Importantly, the financials and materials sectors – twin pillars of the Australian market – declined.
US index futures and Asian markets deteriorated as today’s Australian session wore on. S&P 500 futures were last down 26 points or 0.7 per cent. China’s Shanghai Composite rolled over to a loss of 0.2 per cent. Hong Kong’s Hang Seng shed 0.4 per cent after being up almost 1 percent. Japan’s Nikkei pared its rise to 0.2 per cent.
Down under, the market began well on the back of positive trading updates, then lost ground as traders took profits on some of the post-election rally’s best performers. By the close, three-quarters of the heavyweights of the ASX 20 were underwater.
Winners’ circle
AGM season and trading updates delivered some of the day’s best returns. A busy morning of corporate trading updates saw gains in Telstra, Nine Entertainment and Wesfarmers.
Telstra climbed 3 per cent to a three-month high after unveiling a radical plan to divide the business in three. The biggest change since the float in 1997 will see infrastructure assets divided into mobile and fixed line. A third entity would support both networks. The split will pave the way for possible sales of either or both infrastructure entities.
A rebound in free to air TV advertising revenue helped lift Nine Entertainment 5.1 per cent to its highest level in more than two years. At its virtual AGM, the company told shareholders it expects metro revenues to improve by 15 per cent this quarter, boosting first-half earnings by around 30 per cent.
News that online sales at Bunnings doubled and post-lockdown shopping in Melbourne has been brisk helped lift Wesfarmers 2.5 per cent. A rise in home improvements among stuck-at-home workers lifted Bunnings overall sales by 25.2 per cent.
Xero hit an all-time high during a positive session for tech stocks following gains on the Nasdaq. The accounting software company rose 0.6 per cent after reporting a 21 per cent rise in half-year revenue to $409.8 million and a 19 per cent increase in subscribers. Afterpay climbed 3.3 per cent, Nanosonics 2.7 per cent and Bravura Solutions 2.6 per cent.
Pathology specialist Sonic Healthcare gained 0.7 per cent after CEO DR Colin Goldschmidt told shareholders Covid-19 testing will keep its labs in work for months to come. Medibank Private put on 1.8 per cent after announcing a 2.27 per cent increase in policyholders over the first four months of the financial year.
Doghouse
Utilities was the worst of the sectors, falling 1.9 per cent as APA Group gave up 1.7 per cent and AGL Energy 1.8 per cent. AusNet Services reversed much of yesterday’s post-half-year result rally, falling 2.9 per cent.
Iron ore miner Fortescue Metals sank 4.3 per cent a day after flagging a strategic move into renewable energy. BHP slid 1.1 per cent and Rio Tinto 0.7 per cent.
NAB fell 2.4 per cent as it traded without its dividend. Westpac gave up 1.9 per cent, CBA 1.8 per cent and ANZ 1.1 per cent.
The energy sector took a breather following a 16 per cent surge over three sessions. Cooper Energy dipped 2.7 per cent, Santos 1.5 per cent and Woodside 0.6 per cent. Beach Energy bucked the trend, rising 1 per cent.
A third day of declines pushed the gold sub-sector to its lowest level since June. Ramelius Resources slid 3.9 per cent to a near five-month low. Saracen Mineral sank 3.5 per cent, Westgold 3.6 per cent and Newcrest 0.6 per cent.
Nearmap dipped 3.2 per cent after reaffirming guidance. Graincorp dropped 1 percent despite announcing a statutory full-year profit of $343 million.
Other markets
Oil pushed briefly above US$44 a barrel before paring gains. Brent crude was lately up nine cents or 0.2 per cent at $US43.89 a barrel after trading as high as US$44.26.
Gold pushed further away from critical support around US$1,850 an ounce, lately up $6 or 0.3 per cent at $US1,867.90 an ounce.
The dollar eased 0.16 per cent to 72.72 US cents.
Hot today and not today
Hot today: Rhythm Biosciences (ASX:RHY) hit an all-time high after its prototype test for rectal cancer outperformed the current standard test kit in a company trial. CEO Glenn Gilbert said preliminary results indicated the firm’s ColoSTAT test kit was more accurate than the market standard and the results of previous testing by the CSIRO. The study tested the prototype on 100 cancerous and 100 healthy samples. RHY’s share price surged 50 per cent to 42 cents.
Not today: Vicinity Centres (ASX:VCX) declined 1.8 per cent after warning foot traffic at its malls continues to be impacted by travel restrictions and city staff working from home. The company told shareholders at today’s virtual AGM it was unable to provide earnings guidance for the year due to on-going uncertainty caused by Covid. The company still intends to pay a dividend for the half-year, provided conditions do not deteriorate materially.
