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The share market suffered its first setback in four sessions following weak US leads and as “messy” jobs data muddied the outlook for interest rates.
The S&P/ASX 200 declined 15 points or 0.21 per cent from yesterday’s ten-week closing high. The index finished more than 30 points off its morning low.
Eight of eleven sectors retreated, led by tech and consumer stocks. Energy, healthcare and consumer staples resisted the trend.
What moved the market
The ASX outperformed regional peers as a mixed July employment report appeared to tilt the balance marginally in favour of a smaller interest rate hike next month following three consecutive increases of 50 basis points. While the official unemployment rate dropped to 3.4 per cent, total employment unexpectedly fell.
“Today’s employment data was a mixed bag, with unemployment hitting a 48-year low whilst job growth contracted at its fastest pace since October,” City Index senior market analyst Matt Simpson said.
“But to see 86k full-time jobs disappear has come as a surprise, and likely noted by the RBA. And that could tip the scales towards a 25bp hike at their next meeting over a 50bp hike – and in turn provide further relief to equity traders (and potentially support the ASX) which is holding above 7100 despite deeper selloffs amongst its peers.”
AMP’s heat of investment strategy, Shane Oliver, said the data was “messy“.
“The RBA is likely to regard the July labour mkt data as remaining very strong and consistent with further rate hikes…” he tweeted. “…that said there is a strong case for the RBA to slow the pace of hikes (given lags, next years fixed rate cliff and the impact on households) so we are ambiguous as to whether the Sept hike will be +0.25 or +0.5%. +0.4% would be a reasonable compromise.”
Asian markets logged solid falls in the wake of an overnight reversal on Wall Street. US stocks retreated amid speculation the recovery since mid-June has left the major indices overbought in the short term. The S&P 500 retreated 0.72 per cent.
The Asia Dow dropped 0.63 per cent this afternoon. China’s Shanghai Composite lost 0.48 per cent, Hong Kong’s Hang Seng 0.58 per cent and Japan’s Nikkei 0.87 per cent.
Winners’ circle
Intellectual property services group IPH surged 16.02 per cent to a two-and-a-half-year high after snapping up Canada’s leading IP firm. IPH will acquire Smart & Biggar for $387 million. The firm also reported a modest dip in full-year net profit to $52.6 million from $53.6 million in FY21.
Penfolds owner Treasury Wine Estates rallied 4.04 per cent with supply chain optimisation measures expected to offset inflationary pressures and cost increases this fiscal year. The winemaker plans to raise prices for its premium and luxury brands.
Trading software-maker Iress firmed 1.76 per cent upon reporting a 29 per cent improvement in underlying half-year profit. Revenues increased 6 per cent.
Energy stocks rose after Brent crude rallied for the first time in four sessions. Santos gained 2.32 per cent. Woodside Energy added 1.13 per cent.
Healthcare and consumer staples were the other sectors to rise. CSL continued to recover from yesterday’s full-year result, gaining 2.29 per cent. Coles tacked on 0.36 per cent.
Coal was another pocket of strength after a 2.2 per cent pop in Newcastle prices. Whitehaven put on 2.21 per cent, New Hope 3.72 per cent and Coronado 2.33 per cent.
A 10.7 per cent improvement in full-year net profit helped Medibank hold its ground. The private health insurer will pay a full-ranked final dividend of 7.3 cents per share.
Doghouse
Transurban slumped 3.41 per cent after reporting a dip in traffic volumes. Average daily traffic across the roll road operator’s portfolio declined 0.5 per cent in FY22. The firm flagged an expected increase in costs this fiscal year.
Origin Energy slid 2.64 per cent after reporting a statutory loss of $1.429 billion and declining to offer guidance for the current fiscal year. The company expects underlying earnings to improve, but said there was “uncertainty around the range of potential earnings outcomes for FY2023”.
Regis Resources fell 8.52 per cent after flagging revisions to the cost assumptions underpinning valuations of gold stockpiles. The miner expects to report a full-year statutory net profit after tax of $10-$20 million when it releases earnings on August 25.
Blackmores dropped 10.07 per cent as inflationary pressures, supply-chain issues and Chinese lockdowns clouded its outlook. The vitamins manufacturer increased underlying profit by 22.6 per cent last fiscal year to $31.1 million.
Codan dropped 9.75 per cent as a record underlying net profit was overshadowed by news the metal detection and communications firm will rely on a strong second half in FY23 amid “challenging” conditions. Minelab sales this half “may not” reach FY22 levels.
Nuix shed 3.52 per cent after full-year earnings collapsed 82 per cent. Telix Pharmaceuticals dropped 8.68 per cent as its full-year loss blew out to $70.9 million.
Other drags included gold miner Newcrest -2.86 per cent, ANZ Bank -1.21 per cent and Wesfarmers -0.84 per cent.
Other markets
US futures extended last night’s retreat. S&P 500 futures drifted down eight points or 0.2 per cent.
Oil built on last night’s 1.4 per cent bounce. Brent crude improved 21 US cents or 0.2 per cent to US$93.86 a barrel.
Gold recouped US$1.20 or less than 0.1 per cent at US$1,777.90 an ounce.
The dollar eased 0.11 per cent to 69.23 US cents after tumbling more than 1 per cent overnight.
