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The Australian share market logged its third losing week in a month as financial markets continued to adjust for higher interest rates.
The S&P/ASX 200 skidded 96 points or 1.4 per cent this session after NAB and ANZ raised their forecasts for next month’s RBA rates call. The moves followed an appearance today by Reserve Bank Governor Philip Lowe before a parliamentary committee.
All 11 sectors declined. Gold miners and energy producers were among the main drags following overnight pressure on metals and crude. Recession-proof gambling stocks provided some of the day’s best returns.
What moved the market
Heavy falls on Wednesday and again this session condemned the Australian benchmark to a weekly loss of 147 points or 2.1 per cent. The index ended the session just 18 points above last week’s seven-week low.
A week that began with the back-half of a four-session winning run soured on Tuesday night when US consumer price data underlined the uphill battle facing central banks to control inflation. Wall Street responded with its heaviest fall in more than two years.
The retreat continued overnight with the S&P 500 dropping 1.13 per cent to a two-month low. Stocks fell after economic data did little to dissuade the Federal Reserve from another jumbo rate hike next week.
“The uptick in retail sales, lower jobless claims, and the recent finding on August inflation give the Fed all the justification it seeks to go for a sharper 100 bps rate hike as the past 75 bps hikes are yet to show any impact on the labour market and consumer spending. The market, at the moment, is dancing to the tunes of inflation and spending data and expected Fed moves,” Kunal Sawhney, CEO of research group Kalkine, said.
A fall in US futures hinted at further pressure tonight. S&P 500 futures skidded 29 points or 0.74 per cent.
ANZ and NAB raised their rates forecasts this morning after RBA Governor Lowe told a parliamentary committee the central bank will “do what is necessary to make sure that higher inflation does not become entrenched”.
“We are committed to returning inflation to the 2 to 3 per cent target range. We are seeking to do this in a way that keeps the economy on an even keel. It is possible to achieve this, but the path here is a narrow one and it is clouded in uncertainty,” Lowe said.
Both banks predict the central bank will hike the cash rate target by half a percentage point next month to 2.85 per cent. Previously, both forecast a smaller increase of 25 basis points after five straight hikes this year.
The market was unmoved by signs of improvement in China’s economy. Reports this morning showed factory activity, retail sales, asset investments and employment all strengthened more than expected last month.
Industrial production was up 4.2 per cent year-on-year from 3.8 per cent in July. Retail sales popped 5.4 per cent from July growth of 2.7 per cent.
Winners’ circle
Recession-proof gambling stocks provided most of the index’s best performers. Star Entertainment rallied 5.07 per cent. Tabcorp gained 4.26 per cent. Pokie-maker Aristocrat Leisure edged up 0.23 per cent.
Share registry Computershare was best in class during Wednesday’s bloodbath and with a rise of 4.42 per cent was also among today’s best movers. Other notable gains included plumbing supplier Reliance Worldwide +2.79 per cent and media groups News Corp +2.5 per cent and Nine Entertainment +1.96 per cent.
Speculators continued to embrace green metal discoveries. Desert Metals jumped 15.66 per cent after assays confirmed rare earths at the miner’s Innounendy project in WA. Managing Director Rob Stuart said the assays showed “encouraging grades over significant widths from close to surface”.
Mamba Exploration surged 32 per cent after using radiometric data to identify thorium anomalies similar to those on other discoveries in the upper Gascoyne. Field evaluation is planned for next month.
A positive update on a UK coal project lifted New Age Exploration 84.62 per cent.
Doghouse
The ASX index of gold miners sank 4.55 per cent to a near four-year low after gold fell through a support level, signalling possible further weakness ahead. The yellow metal declined 1.9 per cent to its worst close since April 2020.
Several gold miners plumbed 52-week lows, among them Silver Lake Resources -6.64 per cent, Ramelius -5.11 per cent and Evolution Mining -5.14 per cent.
Industry heavyweight Newcrest shed 2.75 per cent. Gold Road Resources gave up 8.76 per cent, De Grey 6.85 per cent and Sandfire 6.76 per cent.
Oil and gas producers retreated after a global growth warning from the World Bank sent shivers through energy markets. Woodside Energy lost 2.94 per cent, Santos 2.39 per cent and Beach Energy 4.11 per cent.
Other heavyweight drags included James Hardie -4.54 per cent, Goodman Group -2.68 per cent and Transurban -2.47 per cent. BHP shed 1.81 per cent as iron ore dropped 1.6 per cent in afternoon trade in China.
Atlas Arteria dived 9.71 per cent to $6.59 after raising $2.5 billion from institutional investors at $6.30 per security to fund the acquisition of a two-thirds stake in the Chicago Skyway toll road.
Other markets
The Asia Dow was on track for a fifth straight losing week after giving up 0.84 per cent. China’s Shanghai Composite shed 1.43 per cent, Hong Kong’s Hang Seng 0.51 per cent and Japan’s Nikkei 1.04 per cent.
Oil recouped a fraction of last night’s 3.5 per cent fall. Brent crude rebounded 33 US cents or 0.36 per cent to US$91.17 a barrel.
Gold added to last night’s 1.9 per cent decline. The yellow metal dropped US$6 or 0.36 per cent to US$1,671.30 an ounce.
The dollar bounced 0.27 per cent to 67.03 US cents.
