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Aussie shares hit a two-week low as US futures hinted at a third night of losses if tonight’s consumer inflation report disappoints.
The S&P/ASX 200 fell 52 points or 0.73 per cent. The index dropped as low as 7006.6, its weakest level since April 27, before a partial recovery to 7044.9.
A dwindling rebound in technology stocks and gains in Telstra, Fortescue Metals and CBA were outmatched by declines across the rest of the banks and miners.
What moved the market
The mood on world equity markets has deteriorated this week as investors assess the inflationary implications of rising commodity prices and central bank and government stimulus spending. The Dow Jones Industrial Average skidded 473 points or 1.36 per cent overnight to its heaviest loss since February.
“Inflation alarm bells are ringing louder as sky-high commodity prices, the government’s unprecedented stimulus, and labour shortages in the US market continue to strengthen the wave of price anxiety,” Kalkine Group CEO Kunal Sawhney said.
Two days of sharp declines have dragged the Australian benchmark 128 points off Monday’s record close. Souring US futures doused hopes of a recovery this session. Nasdaq futures faded 0.72 per cent ahead of tonight’s consumer price index reading for April. S&P 500 futures fell 0.49 per cent.
Last night’s federal government budget cash splash was overshadowed by global pressures, but should help Australian business in the long run, Mr Sawhney said.
“The big-spending Federal Budget has emerged as a tailwind for millions of Australians who are set to harness the benefits of tax cuts and potential job opportunities. Low-and-middle income earners and businesses appear to be one of the biggest beneficiaries of the budget which delivers significant tax offset to these groups.
“Additionally, the budget seems to have eased some pressure off the aged-care sector, first home buyers, gaming industry, women, and single parents through significant funding boost and relaxation schemes. Having said that, more could have been done for pandemic-hit sectors like aviation, tourism and education, that continue to bear a heavy brunt of COVID-19-induced border restrictions.”
Travel and tourism stocks faded for a second day after the budget confirmed the government does not expect to open the borders to international visitors until next year at the earliest. Sydney Airport slid 4.79 per cent, Qantas 3.43 per cent, Flight Centre 4.52 per cent and Webjet 2.94 per cent.
Winners’ circle
Dip-buyers picked up some of the biggest losers over the last month. Adore Beauty rallied 8.82 per cent from an all-time low. Coal exporter Coronado bounced 14.66 per cent. Beaten-up BNPL players Afterpay and Z1p Co rose 0.35 and 0.3 per cent, respectively. Infant formula maker A2 Milk rallied 0.7 per cent from its lowest level in three and a half years. Aerial mapping group Nearmap reversed 4.45 per cent from yesterday’s 11-month nadir.
Commonwealth Bank rose 1.05 per cent after doubling profits last quarter as the economy improved. Increases in home loans and business lending helped lift statutory net profit from $1.2 billion over the first three months of last year to $2.4 billion this year.
Technology was the best of the sectors, rising 0.76 per cent off yesterday’s seven-month closing low. The sector, one of last year’s best performers, has lost almost a quarter of its value since February due in part to fund managers discounting future earnings to reflect a likely rise in borrowing costs.
The ‘WAAAX’ group of sector leaders all advanced in morning action but struggled to hold their gains. Appen gained 0.71 per cent, Afterpay 0.35 per cent and Xero 2.25 per cent. WiseTech faded to a loss of 0.74 per cent. Altium shed 0.53 per cent.
A 17 per cent lift in full-year net profit to $146.1 million boosted building materials manufacturer CSR. Shares rallied 4.23 per cent to their strongest level since 2008. The company declared a final dividend of 14.5 cents.
At the heavyweight end of the index, Brambles climbed 0.38 per cent and Telstra inched up 0.87 per cent. Fortescue Metals stood alone among the major miners with a rise of 1.41 per cent.
Trade in online automotive marketplace carsales.com was suspended while the company raises $600 million to buy a 49 per cent stake in US marketplace Trader Interactive. The purchase will expand the company’s US footprint. The company has a call option to acquire the rest of the US firm.
Doghouse
The utilities sector sank 2.2 per cent as a 2.7 per cent decline in revenue took the shine off AusNet Services’ full-year result. Shares in the electricity transmission network sank 7.71 per cent despite a 3.9 per cent lift in net profit to $302 million. The company will pay a dividend of 9.5 cents per share.
REITs dropped 1.12 per cent after the yield on ten-year Australian government bonds jumped six basis points. Cromwell Property shed 2.79 per cent, Dexus 2.78 per cent and Goodman Group 1.15 per cent.
Westpac led the banks lower, falling 1.19 per cent. ANZ gave up 0.55 per cent and NAB 1.01 per cent. BHP fell 0.55 per cent and Rio Tinto 0.44 per cent. Newcrest shed 0.9 per cent.
Other notable heavyweight declines included Woodside -1.58 per cent, Coles -1.23 per cent, Wesfarmers -0.98 per cent and Transurban -0.98 per cent.
Insurer Suncorp sank 5.28 per cent following broker downgrades from Citi and Morgans.
Other markets
Asian markets traded mixed but mostly lower. The Asia Dow sank 1.22 per cent. Japan’s Nikkei dropped 1.45 per cent. China’s Shanghai Composite put on 0.16 per cent. Hong Kong’s Hang Seng added 0.04 per cent.
Oil added to slender overnight gains. Brent crude crept up four cents or 0.06 per cent to US$68.59 a barrel.
Gold declined $6.20 or 0.34 per cent to US$1,829.90 an ounce.
The dollar retreated 0.55 per cent to 77.94 US cents.
