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Australian shares fell for the first time in four sessions as a global market retreat continued ahead of tonight’s nervously-anticipated July US inflation report.
The S&P/ASX 200 finished 36 points or 0.51 per cent lower after a mid-session recovery ran out of gas.
Commonwealth Bank fell after reporting a sharp contraction in lending margins. BHP rolled over in afternoon trade as iron ore prices retreated. Tech stocks sank in the wake of a fall in the Nasdaq Composite in the US.
What moved the market
The ASX’s stubborn recent resistance to overseas pressures finally buckled ahead of a US inflation update with the capacity to set the tone on global markets for the next few weeks. After shrugging off three losing nights on Wall Street, the ASX 200 joined Asian markets in retreat.
“Over the last three days, the ASX 200 index was holding up to gains despite the correction in US indices. But now it seems investors are booking profit in recent gainers ahead of tonight’s crucial CPI data in the US,” Kunal Sawhney, chief executive of research group Kalkine, said.
The Asia Dow lost 0.78 per cent this afternoon. China’s Shanghai Composite shed 0.57 per cent, Hong Kong’s Hang Seng 2.39 per cent and Japan’s Nikkei 0.69 per cent. S&P 500 futures dipped five points or 0.13 per cent.
The declines followed overnight weakness in Europe and the US. The S&P 500 fell for a fourth night as traders booked profits from a three-week market recovery. The US benchmark eased 0.42 per cent.
“Attention now turns to tonight’s U.S inflation report for July. Due to a sharp fall in gasoline and energy prices, headline inflation is expected to rise by just 0.2% in July, ensuring the annual headline inflation rate falls to 8.7% YoY from 9.1% in June. However, core inflation which strips out the volatile price categories of food and energy, is expected to rise from 5.9% to 6.1%,” City Index market analyst Tony Sycamore said.
Investors fear a stronger-than-expected inflation reading could seal another 75 basis point rate hike next month, or even larger.
“Right now, Wall Street indices lack direction as investors are unable to assess how aggressively the Fed will hike interest rates and its impact on corporate profits and the economy,” Kalkine’s Sawhney said.
Tech stocks led today’s ASX sell-off after weak outlooks from chip makers Micron and Nvidia pointed to faltering consumer demand. The Nasdaq Composite dropped 1.19 per cent overnight.
Winners’ circle
A profit upgrade lifted GrainCorp 5.1 per cent. Expectations for a bumper winter crop prompted the agribusiness to raise its FY22 underlying net profit outlook to $365-$400 million from previous guidance of $310-$370 million. Underlying earnings were expected to be $680-$700 million, up from guidance of $590-$670 million.
“We expect another well above average ECA [east coast Australian] crop in 2022/23 based on crop development we have seen to date, and a favourable 3-month rainfall outlook,” Managing Director and CEO Robert Spurway said.
A progress update from a clinical trial helped raise Imugene 9.26 per cent. The firm said the first patient in cohort 3 of a Phase 1 trial of its cancer treatment had been dosed.
Mayne Pharma jumped 4.41 per cent after securing $679 million for its Metrics Contract Services business. The firm said the divestment strengthened the balance sheet and unlocked value for shareholders.
Three of the big four banks rallied. ANZ bounced 3.35 per cent. NAB gained 1.38 per cent. Westpac rose 1.37 per cent. Coles was the only other heavyweight to resist the downtrend, inching up 0.16 per cent.
Coal miners were another pocket of strength. Coronado added 6.25 per cent to yesterday’s earnings jump. Whitehaven gained 5.12 per cent and New Hope 3.98 per cent.
Doghouse
Commonwealth Bank declined 0.28 per cent as investors weighed a contraction in margins against improvements in other metrics. Full-year net profit climbed 9 per cent to $9.673 billion as core business volumes expanded and the bank reduced provisions made during the pandemic for bad loans. Operating expenses declined 1.5 per cent.
Net interest margins shrank 18 basis points due to an increase in “low yielding liquid assets and lower home loan margins”. The bank expects margins to recover this year as interest rates rise. Shareholders will receive a fully-franked final dividend of $2.10 per share, slightly below expectations.
A2 Milk slumped 6.85 per cent after a setback in its bid to crack the US market. The US regulator deferred the dairy group’s request to import infant milk formula products. Similar letters were sent to other applicants.
Computershare retreated 4.83 per cent as shareholders focussed on the negatives from a mixed full-year report. Management earnings per share increased by 10.6 per cent, allowing the board to increase the final dividend by 30 per cent. Transaction revenues weakened and US Mortgage Services disappointed.
A costs warning helped pull gold miner St Barbara down 11.57 per cent. The company raised its production costs guidance for FY23 by 13.6 per cent, citing rising energy, labour and consumables costs.
CSL fell 1.56 per cent after completing the acquisition of Swiss giant Vifor Pharma.
Last night’s tech-led sell-off in the US helped drag Block down 6.04 per cent, Megaport 4.89 per cent and Altium 4.34 per cent.
BHP dropped 1.34 per cent as iron ore fell 2.6 per cent in China this afternoon.
Other markets
Gold eased US$7.20 or 0.4 per cent from last night’s six-week high to US$1,805.10 an ounce.
Brent crude dipped 48 US cents or 0.5 per cent to US$95.83 a barrel.
The dollar was unchanged at 69.54 US cents.
