Join our daily newsletter At The Bell to receive exclusive market insights
A seventh straight winning month ended on a soft note amid sliding US futures, earnings disappointments and end-of-month profit-taking.
The S&P/ASX 200 sank 56.5 points or 0.8 per cent to seal back-to-back weekly losses for the first time since February.
Despite the setback, a strong first half of the month ensured the post-pandemic run of advances continued. The index put on 235 points or almost 3.5 per cent for April, its best return since the post-US election rally in November. The index has risen for 12 of the last 13 months.
What moved the market
The last session of the month is often volatile as fund managers lock in gains. Down-pressure today was compounded by falling US futures and profit setbacks for ANZ and Beach Energy.
S&P 500 futures declined 16 points or 0.37 per cent this afternoon as a poorly-received trading update from Twitter overshadowed a strong result from Amazon. Twitter shares dived 11.51 per cent in extended trade. Amazon climbed 2.38 per cent.
Megacap US tech stocks have outperformed during the pandemic, but share market gains have been harder to come by this season with the major indices at record levels. The S&P 500 rose 0.68 per cent to a new peak overnight.
“Overall, sustainability of earnings winners needs to be closely evaluated. While some of the prominent companies have been able to set high bars with their solid earnings reports backed by record-high consumer demand, it is yet to be seen whether these results could be sustained after the economy transitions out of the COVID-19 storm,” Kalkine Group CEO Kunal Sawhney said.
“Besides, the potential withdrawal of the central bank’s safety net is expected to decide the growth trajectory of the tech players. Dividend charter and valuation scenario needs to be closely looked at, instead of merely relying on earnings updates.”
Winners’ circle
Mesoblast bounced 6.83 per cent on news it retains hopes for its experimental treatment for Covid despite a trial setback. The company plans to meet with the US Food and Drug Administration to discuss potential applications.
“The mortality benefit observed with remestemcel-L in ventilator-dependent patients younger than 65, particularly in combination with dexamethasone, has the potential to change the treatment regimen in this critical patient population,” Dr Fred Grossman, the firm’s Chief Medical Officer, said. “As cases continue to surge in younger patients across the US, we plan to meet with the FDA to discuss next steps in the regulatory process.”
A 7 per cent increase in commodity revenue last quarter thanks to rising oil and LNG prices helped lift Origin Energy shares 1.22 per cent. The price boost and cost savings partly offset a 4 per cent decline in production due to maintenance.
Cimic climbed 2.54 per cent after reporting a quarterly net profit of $100 million and reaffirming full-year profit guidance.
Transurban and Fortescue Metals were the only stocks in the ASX 20 index of market giants to advance. The toll road operator gained 0.93 per cent. Fortescue inched up 0.04 per cent.
Doghouse
The financial sector dropped 0.67 per cent after ANZ flagged an $817 million hit to next week’s first-half earnings. Cash profit will be affected by a mix of write-downs, customer remediation charges, restructuring charges and a previously announced class action settlement. Shares in the bank fell 0.69 per cent. CBA shed 1.07 per cent, Westpac 0.83 per cent and NAB 0.41 per cent.
Beach Energy lost almost a quarter of its market value after a review forced the company to downgrade its oil and gas reserves and scrap its five-year outlook. The review was triggered by unexpectedly sharp declines in production rates. The company now expects production from its Western Flank assets to be four – five million barrels of oil equivalent lower than previous estimates. The share price dived 24.11 per cent to a five-month low.
Santos slipped 0.99 per cent during a generally downbeat session for oil companies after selling a 25 per cent interest in Bayu-Undan and Darwin LNG to its Korean partner SK E&S. The sale secured US$186 million. Santos remains the operator with a stake of 43.4 per cent.
Sleep apnoea specialist ResMed slumped 4.21 per cent on news the company has set aside $255 million to settle a dispute with the Tax Office. The provision contributed to a net loss of $78.5 million for the quarter. Net income increased 1 per cent to $190.4 million.
Most of the major miners turned lower despite a flat session in iron ore and copper’s first push above US$10,000 a tonne in a decade. BHP declined 1.97 per cent. Rio Tinto fell 1.68 per cent. Newcrest dropped 2.1 per cent following a third straight drop in gold.
Afterpay pared two days of gains, falling 2.37 per cent. Woodside shed 1.68 per cent, Woolworths 1.28 per cent and CSL 0.85 per cent.
AMP dropped 1.76 per cent despite reassuring investors its turnaround strategy had made “substantial progress”. The company narrowly avoided a second strike against its remuneration report at today’s AGM, avoiding a board spill.
Other markets
Losses on Asian markets accelerated as the session wore on. The Asia Dow fell 1.18 per cent. China’s Shanghai Composite gave up 1.31 per cent, Hong Kong’s Hang Seng 1.73 per cent and Japan’s Nikkei 0.92 per cent.
Oil trimmed a three-day rally. Brent crude declined 49 cents or 0.72 per cent to US$67.56 a barrel. Gold inched up 20 cents or 0.01 per cent to US$1,768.50 an ounce.
The dollar eased 0.04 per cent to 77.74 US cents.
