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The share market suffered its biggest setback since February, finishing at a six-week low as negative US futures compounded overnight falls on Wall Street.
The S&P/ASX 200 slumped 134 points or 1.9 per cent as all 11 sectors declined. The loss was the index’s heaviest since a 161-point dive on the last session of February.
Roughly nine out of ten stocks on the ASX 200 declined. None of the heavyweights of the S&P/ASX 20 advanced.
What moved the market
The big three iron ore producers let the retreat after China threatened to look elsewhere for the steel-making ingredient. The National Development and Reform Commission, China’s economic planning body, said China would increase domestic production, seek alternative sources and strengthen regulations to curb soaring prices. The announcement represented the latest move in an escalating dispute between the trading partners.
“The political spat between Australia and China seems to be taking no breather. In the latest development, China has decided to boost iron ore production to reduce its dependence on Australian imports. Adding iron ore to plenty of curbs already in place on Australian commodities may turn out to be a risky move for China, given record-high prices of iron ore and the country’s dependence on Australia’s imports,” Kalkine Group CEO Kunal Sawhney said.
Rio Tinto fell 3.75 per cent, BHP 3.42 per cent and Fortescue Metals 3.14 per cent. Champion Iron declined 4.36 per cent. All four companies hit record levels this year as ore prices reached unprecedented levels.
Wall Street laid the groundwork for the sell-off after finishing at session lows overnight. The S&P 500 fell away after lunch to a loss of 0.85 per cent. The Nasdaq Composite dropped 0.56 per cent after being up as much as 0.8 per cent.
“At a time when inflation is on its way up in the US, investors are worried whether the inflation trend will prove to be transitory or will endure,” Mr Sawhney said. “Concerns are mounting that surging inflation may force the Federal Reserve to dial back its extensive support to prevent the US economy from overheating.”
Softening US futures stifled any hope of an ASX bounce this afternoon. S&P 500 futures declined 17 points or 0.4 per cent, suggesting further weakness tonight.
Market jitters were exacerbated by sharp falls in cryptocurrencies. Bitcoin slumped almost 9 per this afternoon, falling below US$40,000. Ethereum sank 13.34 per cent.
The day’s economic data had minimal impact. Consumer optimism faded, but remained at historically elevated levels. The Westpac-Melbourne Institute index of consumer sentiment dropped 4.8 per cent this month to 113.1 from its highest level in 11 years.
Wages increased slightly more than expected over the first three months of the year. The Wage Price Index climbed 0.6 per cent over the quarter, versus expectations for growth of 0.5 per cent. The annual growth rate was 1.5 per cent.
Winners’ circle
Artificial intelligence software-maker Appen was the standout on a day when winners were scarce. The share price bounced 17.44 per cent off two-year lows after the company announced a business restructure and reaffirmed earnings guidance. The company will also change its reporting currency to US dollars to reflect the fact more than 90 per cent of revenue is generated in US dollars.
Nuix was the session’s other star turn, rising another 4.57 per cent following yesterday’s Investor Day update.
United Malt Group overcame early weakness after reporting half-year results slightly above guidance. Covid lockdown restrictions helped drag revenue down 11 per cent to $590 million. The company said volumes had recovered since March to around 95 per cent of pre-Covid levels. The share price climbed 1.58 per cent.
An optimistic outlook helped investors look beyond an 86 per cent collapse in full-year revenue at online travel agent Webjet. Revenue dived from $266.1 million in FY2020 to $38.5 million this year as Covid restrictions crushed international travel. The company said it was well positioned to harvest pent-up demand when borders reopened. The share price rose 0.64 per cent.
Doghouse
Sector declines ranged from 0.66 per cent for defensive consumer staples up to 3.02 for materials and 2.79 per cent for energy stocks after crude wobbled overnight. Oil Search led the retreat in oil companies, falling 4.05 per cent. Santos dropped 2.23 per cent. Woodside shed 2.57 per cent.
The financial sector dropped 1.81 per cent as Macquarie Group shed 2.7 per cent, CBA 2.5 per cent, ANZ 1.41 per cent, NAB 1.33 per cent and Westpac 1.1 per cent.
EML Payments picked the wrong day to reveal its Irish subsidiary had been contacted by the Central Bank of Ireland over concerns about anti-money laundering and counter-terrorism financing, risk control and governance. The bank said it was “minded to issue directions”. EML said directions, if issued, would impact its European operations. The share price briefly halved before paring its loss to 45.63 per cent.
St Barbara probed fresh 14-month lows following yesterday’s production downgrade, falling 6.97 per cent.
Kathmandu dipped 0.34 per cent after announcing Michael Daly will take over from Xavier Simonet as CEO and Managing Director.
Other markets
The Asia Dow declined 0.8 per cent. China’s Shanghai Composite dropped 0.46 per cent. Japan’s Nikkei shed 1.5 per cent. Trade in Hong Kong was suspended for the Buddha’s Birthday public holiday.
Oil added to overnight weakness. Brent crude slid 81 cents or 1.18 per cent to US$67.90 a barrel. Gold improved $1.90 or 0.1 per cent to US$1,869.90 an ounce.
The dollar hovered just below 78 US cents following overnight weakness in the greenback. The Aussie inched up 0.02 per cent to 77.9 US cents.
