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A week of sharp reversals ended with a whimper as declines in mining and oil companies offset a tech rebound, leaving the share market more or less where it began on Monday.
The S&P/ASX 200 edged up 11 points or 0.15 per cent to finish 16 points or around 0.2 per cent ahead for the week.
Advances in tech stocks, CSL and other bond proxies were largely cancelled out by declines in CBA, Woodside and the mining majors.
What moved the market
A week that started with back-to-back advances was derailed on Wednesday by a cryptocurrency collapse, before a strong rebound yesterday. The market briefly threatened a second day of solid gains, rising as much as 37 points this morning before caution set in.
Traders kept a wary eye on Bitcoin after Wednesday night’s 31 per cent tumble unsettled equity markets. The S&P 500 rebounded 1.06 per cent overnight as cryptos recovered.
US futures trimmed gains this afternoon as Bitcoin fell back below US$40,000. S&P 500 futures rose five points or 0.13 per cent. Bitcoin traded close to US$42,000 this morning before easing 1.14 per cent to US$39,650. Other digital coins also turned negative.
Kalkine Group CEO Kunal Sawhney said this week’s volatility across several markets reflected broader concerns about the implications of rising inflation on monetary policy.
“As investors continue to re-evaluate the potential impact of inflation, wide fluctuations can be noticed in higher-risk assets like cryptocurrencies and equities” Mr Sawhney said. “Investors continue to worry about whether the growing pace of inflation will prompt the US Fed to raise interest rates and taper its bond purchases.
“Investors’ concerns are further mounting after the Fed’s minutes from April indicated at central bank considering tapering its bond-buying program in the upcoming meetings. Looking forward, the US economy’s progress towards Fed’s maximum-employment and price-stability goals will be crucial to drive the central bank’s decision in making any adjustment in the pace of asset purchases.”
The minutes from the latest Reserve Bank policy meeting released earlier in the week indicated the bank expects inflation to jump this year, then fade as the sugar-hit from pent-up demand dissipates. The bank reiterated its conviction it will not have to adjust policy settings until at least 2024.
The session’s economic data confirmed the recovery remained on track. Retail sales jumped 1.1 per cent last April, twice the market consensus. Markit’s manufacturing PMI edged up to 59.9 this month from 59.7 in May. Services industry and composite PMIs eased a fraction but remained at historically high levels.
Winners’ circle
A week for fallen stars saw the battered tech sector rise 1.57 per cent this session to its highest level in almost two weeks. EML Payments climbed 15.81 per cent, Xero 4.16 per cent and Nuix 3.52 per cent.
A2 Milk climbed 6.32 per cent further from this week’s four-year low. Bubs Australia rose 7.35 per cent. Blackmores rallied 2.06 per cent.
Tech stocks set the early running, but the heavy lifting was done by companies that attract fund flows when bond yields decline. The yield on ten-year Australian government bonds dropped almost four basis points, mirroring a retreat in the US.
Healthcare leader CSL climbed 2.21 per cent, property giant Goodman Group 1.6 per cent and supermarkets Coles and Woolworths 1.59 and 1.97 per cent, respectively. Further down the food chain, InvoCare gained 2.13 per cent, Cromwell Property 1.67 per cent and Atlas Arteria 1.16 per cent.
Westpac was the best of the banks, rising 0.51 per cent. ANZ edged up 0.5 per cent and NAB 0.11 per cent. CBA eased 0.36 per cent off yesterday’s record close.
Travel companies steadied after yesterday’s hit from a Qantas announcement that the airline will slash commissions it pays on plane tickets. Corporate Travel Management advanced 4.37 per cent, Webjet 5.36 per cent and Flight Centre 2.01 per cent.
Aristocrat Leisure rode Monday’s earnings upgrade to a new all-time high. Shares in the gaming machine manufacturer hit a record $41.44 before finishing 0.32 per cent ahead at $40.65.
Doghouse
Kogan sank 14.29 per cent after warning growing pains caused by last year’s rapid expansion meant the online retailer was likely to miss full-year earnings expectations.
Supply-chain problems and higher warehousing costs due to a build-up of inventory cut the retailer’s expected full-year adjusted earnings to $58 – $63 million. The company said this projection was “likely to differ from the current range of analyst forecasts”. The retailer’s share price hit a record $25.57 during the pandemic, but has since more than halved to $8.70.
Woodside slid 3.35 per cent to its lowest level since December as the prospect of the lifting of sanctions on Iran weighed on crude prices. Santos sagged 4.76 per cent, Oil Search 2.42 per cent and Beach Energy 1.57 per cent.
The big miners retreated for a third day since China threatened to increase domestic iron ore production. Rio Tinto shed 0.92 per cent, Fortescue Metals 2.24 per cent and BHP 1.1 per cent. Gold miner Newcrest reversed 1.84 per cent despite a sixth straight advance in the yellow metal overnight.
“If the recent pullback in iron ore and oil prices is seen from the angle of a sharp run-up in 2021, it appears to be a healthy correction,” Kalkine’s Mr Sawhney said. “With most countries grappling with rising inflation and yet to tighten their monetary and fiscal policies, the commodity price rally is expected to continue for quite some time.”
Other markets
A mixed session on Asian markets saw the Asia Dow gain 0.62 per cent and Japan’s Nikkei add 0.75 per cent. China’s Shanghai Composite shed 0.54 per cent. Hong Kong’s Hang Seng lost 0.14 per cent.
Oil declined for a fourth session. Brent crude dropped six cents or almost 0.1 per cent to US$65.05 a barrel. Gold fell $5.40 or 0.29 per cent to US$1,876.50 an ounce.
The dollar retreated 0.19 per cent to 77.55 US cents.
