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Gold miners, supermarkets and bonds outperformed as fears of a global slowdown pushed investors into defensive assets.  

Blue-chips dominated as the S&P/ASX 200 climbed 26 points or 0.37 per cent. Small caps retreated.

What moved the market

Investors rotated into the biggest, safest companies on the index after weak US economic data exacerbated concerns about global growth. The S&P/ASX 20 index of market heavyweights gained 0.83 per cent, roughly twice the broader market. The Small Ordinaries dropped 0.66 per cent.

Bonds rallied, pushing yields lowers and attracting buyers to stocks offering superior returns through dividend payouts. The yield on ten-year Australian government bonds fell to its lowest level of the month.  

Red flags from the US housing market contributed to the ‘risk-off’ mood. Investors with memories of the impact of falling property prices on the 2008 Great Financial Crisis decided bigger was safer.

Today’s ASX action largely mirrored a volatile session on Wall Street where the blue chips of the Dow rallied, while the speculative end of the market struggled. The Dow edged up 0.15 per cent. The Russell 2000 index of small caps sank 1.56 per cent. The Nasdaq Composite shed 2.35 per cent.

One of the triggers for the rush into bonds and out of risk assets was further evidence of pressures on the housing market both here and in the US. House-building in Australia unexpectedly contracted 0.9 per cent last quarter, according to ABS data released today. The slump in construction activity was expected to dent next week’s GDP numbers.

US data also came in weaker than expected overnight. City Index senior market analyst Matt Simpson said the Federal Reserve had a fight on its hands bringing inflation under control without tipping the economy into recession.

“Demand for new homes, confidence in the building sector, and plans for new builds are all pointing lower in the US. And to add insult to injury, consumer confidence hit new lows and the Fed are being forced to rise to fight inflation, against a backdrop of weak growth,” Simpson said.

“The Fed have to tame inflation, and they have said as much themselves. But to do so whilst leading indicators point lower, consumers are anything but confident and concerned over their finances, a storm could be brewing in the economy,” he added.

The Fed will be back in the spotlight tonight with the release of the minutes from this month’s policy meeting.

“Investors are awaiting minutes from Fed’s latest policy meeting tonight, which could provide a deeper insight into the central bank’s plan to control elevated inflation. Speculations are rife that the Fed could move too quickly or go too far in increasing interest rates, which could potentially invite recession in the economy,” Kunal Sawhney, CEO of research group Kalkine, said.

Winners’ circle

The shockwaves from last week’s dire outlooks from US retail giants Walmart and Target began to settle. Woolworths bounced 1.86 per cent. Coles put on 1.98 per cent. IGA operator Metcash added 2.12 per cent.

The big four banks advanced between 1 and 1.8 per cent. Telstra gained 1.55 per cent, Rio Tinto 1.35 per cent and Wesfarmers 1.12 per cent.

The gold sub-sector shone as the hunt for havens from inflation and stock market volatility lifted the yellow metal for a fourth session. Evolution Mining firmed 3.52 per cent, Perseus 4.53 per cent and St Barbara 2.87 per cent. Sector giant Newcrest gained 0.92 per cent.

Costa Group was the session standout, rising 8.59 per cent following an upbeat trading update at today’s annual general meeting. Strong domestic pricing was expected to offset increased costs.

A contract win lifted Worley 0.68 per cent. The engineering group was awarded a services contract for a renewable diesel plant in Nebraska. Heartwell Renewables intends to produce 302 million litres of diesel per year from vegetable oils and tallow.

Woodside edged up 0.66 per cent as it commenced trade under a new name and ticker code following its merger with BHP’s petroleum business. The business trades from today under the name Woodside Energy Group and code WDS. BHP shareholders received shares in the new entity.

Nanosonics rose 1.84 per cent after confirming full-year revenues were expected to be in line with market expectations.

Testing and certification business ALS reported a strong start to the financial year following a 42.1 per cent lift in full-year profit in FY22. Volumes continued to grow across the firm’s Life Sciences and Commodities divisions. The share price rose 1.95 per cent.

Doghouse

Bloodletting on the Nasdaq drove the domestic tech sector down almost 3 per cent. Afterpay owner Block dropped 5.46 per cent. Appen gave up 4.62 per cent, Megaport 5.43 per cent and Novonix 3.83 per cent.

Tabcorp continued to lose altitude after spinning out its lotteries business, falling 3.32 per cent.  

Kiwi medical device manufacturer Fisher & Paykel dropped 2.3 per cent to a 30-month low as the launch of new products failed to offset uncertainty about the coming year. The company unveiled three new products, but declined to offer full-year revenue guidance. Net profit declined 28 per cent in FY2022.  

A broker downgrade from JPMorgan helped pull Challenger down 3.32 per cent following yesterday’s Investor Day. UBS raised its rating to ‘Buy’ at the same time JPMorgan lowered its rating to ‘Underweight’.

Other markets

A mixed session on Asian markets saw the Asia Dow edge up 0.38 per cent, China’s Shanghai Composite 0.79 per cent and Hong Kong’s Hang Seng 0.07 per cent. Japan’s Nikkei dropped 0.22 per cent.

S&P 500 futures climbed 17.5 points or 0.44 per cent.

Oil gained momentum as risk appetite improved. Brent crude rallied 81 US cents or 0.73 per cent to US$111.50 a barrel.

Gold trimmed four days of gains, easing US$6.60 or 0.35 per cent to US$1,858.80 an ounce.

The dollar continued to trade either side of 71 US cents, inching up 0.03 per cent this afternoon to 71.03 US cents.

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