A resilient ASX eked out a third straight advance despite a plunge in US equity futures and the prospect of two more interest rate hikes this year following record core inflation figures.
The S&P/ASX 200 hit a six-week high before paring its rise to 12 points or 0.18 per cent.
Stocks trimmed gains and bond prices fell after inflation data for the September quarter appeared to lock in a rate rise next week, and possibly another in December.
The market clung to a slender gain as rallies in property stocks, gold miners and utilities helped offset pressure from supermarkets, energy producers and some of the banks.
What moved the market
The ASX had enough early momentum to weather blistering inflation figures. Annual trimmed mean inflation climbed from 4.9 per cent to a record 6.1 per cent in the September quarter, defying expectations for a smaller rise to 5.6 per cent. The consumer price index jumped 1.8 per cent, lifting headline annual inflation to a 32-year high of 7.3 per cent.
The report cemented expectations for up to two more interest rate increases this year. The dollar firmed 0.3 per cent to 64.03 US cents.
CBA added a December hike to its rates outlook. ANZ went further, adding a December hike to its forecast and raising its peak for the cash rate target.
“These broad-based, domestically driven inflationary pressures are persistent and harder for the RBA to rein in. As such, we think the RBA will have to take the cash rate to 3.85% by May 2023,” ANZ senior economist Catherine Birch said.
Positive overnight leads from the US ultimately outweighed negative developments during the trading day. The S&P 500 rallied 1.63 per cent to a six-week high as investors continued to bet the Federal Reserve will slow the pace of rate hikes from December.
Stocks on both sides of the Pacific have risen over the last three sessions as US economic data shows signs rate increases are starting to bite. Reports overnight showed a sharp decline in consumer confidence and a second straight monthly fall in house prices.
“The market is pinning its hope on expectations of somewhat softer central banks that would not want the economic slowdown or any hit to the labour market to become entrenched. Central banks are already burdened under the criticism that they did not do much during the early days of inflationary pressures last year,” Kunal Sawhney, chief executive of research group Kalkine, said.
The market faced an additional headwind today from a slump in US futures after heavyweights Microsoft and Alphabet (Google) missed earnings expectations. Both companies tanked in after-market trade, dragging US futures deep into the red.
Microsoft sank 6.7 per cent. Alphabet shed 6.58 per cent. S&P 500 futures swooned 35 points or 0.9 per cent. Nasdaq futures plunged 1.87 per cent.
Costa Group jumped 10.76 per cent after US private-equity firm Paine Schwartz took advantage of recent price weakness to take a 13.78 per cent stake in the firm. Broker Citi said Paine’s shareholding was a long-term investment, rather than the start of a takeover. The share price hit a seven-year low following a profit downgrade earlier this month.
Bega Cheese climbed 1.85 per cent after reaffirming full-year guidance as
CEO Paul van Heerwaarden prepared to step down. Chief Operating Officer Pete Findlay will replace van Heerwaarden as chief of the dairy producer.
Tabcorp edged up 1.03 per cent on news revenue rebounded 18.7 per cent last quarter from a Covid-affected prior corresponding period. The group’s digital revenue market share increased to 24.7 per cent from 23.9 per cent in Q4 FY22.
Positive trading updates lifted miners Ramelius Resources and Mineral Resources. Ramelius gained 4.8 per cent after reaffirming full-year gold production guidance. Mineral Resources put on 2.88 per cent on news production volumes increased 8 per cent from the previous quarter.
Speculative mania flared for the first time in months as mining minnow WA1 Resources surged more than 400 per cent. The miner’s shares bolted 418.52 per cent after a maiden drilling program intersected high-grade niobium mineralisation. Niobium has been identified by several countries as a critical mineral for use in alloys.
The real estate investment trust sector rose for a third session as the cost of long-term borrowing continued to recede. The yield on ten-year Australian government bonds fell 13 basis points this afternoon, dropping under 4 per cent for the first time in a week..
Centuria Industrial REIT gained 3.93 per cent, Abacus Property Group 3.1 per cent and Goodman Group 2.36 per cent.
Aside from Goodman, the pick of the heavyweights were toll road operator Transurban +1.74 per cent, gold miner Newcrest +1.58 per cent and pokie-maker Aristocrat Leisure +1.49 per cent.
Medibank plunged 18.12 per cent after scrapping its growth forecast following a cyber-attack. The health insurer withdrew its FY23 outlook for policyholder growth, citing the “uncertain impact” of the attack. The firm expects earnings to take a hit of at least $25-$35 million as it deals with fallout from the incident.
Supermarket Coles slipped 2.65 per cent as a 1.3 per cent lift in first-quarter sales was overshadowed by news price inflation climbed to 7.1 per cent from 4.3 per cent the previous quarter.
“Coles’ businesses are not immune to the inflationary cost pressures, including the impact from increased logistics and fuel costs, salary and wages and construction costs on capital expenditure projects,” the company said.
Rival Woolworths dropped 3.15 per cent on news Australian food sales declined 0.5 per cent in the first eight weeks of the fiscal year. New Zealand sales fell 1 per cent. Big W showed strong sales growth, expanding by almost 30 per cent.
Codan slumped 20.7 per cent on news African demand for metal detectors was unlikely to recover this fiscal year. Africa is the firm’s biggest client base. Global sales from the Minelab division were expected to fall to $70-$80 million this half from $138 million in the same period last year.
Hong Kong’s Hang Seng bounced 2.17 per cent as Asian markets built in afternoon trade The Asia Dow advanced 1.09 per cent. China’s Shanghai Composite rallied 1.42 per cent. Japan’s Nikkei put on 1.06 per cent.
Oil reversed overnight gains as falling US futures dented risk appetite. Brent crude retreated 66 US cents or 0.7per cent to US$92.86 a barrel.
Gold rose US$2.30 or 0.14 per cent to US$1,660.30 an ounce.