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The share market’s winning run ended at three after weak US leads and a mid-session fade on Asian markets capped a rebound.
The S&P/ASX 200 more than halved its opening loss but could not repeat its feat of the previous two sessions of scraping a late win. The index pulled up 18 points or 0.24 per cent in the red.
Records for Macquarie Group and Aristocrat Leisure, plus gains in most of the banks, helped offset declines in defensive sectors.
What moved the market
US investors had a long weekend to weigh the implications of Friday’s weak August jobs report and appeared to conclude the negative implications of faltering growth outweighed the upside of any delay in reducing central bank support for the economy. The Dow fell 0.76 per cent. The S&P 500 lost 0.34 per cent.
“The slowing pace of economic recovery was seen to be overshadowing hopes that the central bank will retain its accommodative monetary policy stance for a little longer,” Kalkine Group CEO Kunal Sawhney said.
“In the coming days, investors are expected to continue assessing concerns over increasing virus infections against prospects of Fed maintaining its monetary policy support. Any hawkish stance from the central bank on bond tapering or interest rates may not emerge as welcome news for the stock market,” he added.
Australian investors were still coming to terms with yesterday’s announcement the Reserve Bank will pump less money into the economy despite the current economic malaise. The bank announced it would press on with a plan announced last month to taper its bond buying program.
“A day after the central bank tapered bond purchases, the Australian benchmark index experienced a sharp fall this morning. The concerns over the global economic outlook amid surging COVID-19 infections seem to be denting the market sentiment,” Mr Sawhney said.
“The central bank expects the economy to grow again in the December quarter on the back of increasing vaccinations and easing restrictions. However, the re-emergence of virus cases in countries with high vaccination rates, like Israel, underscores the uncertainty on the path ahead,” he added.
Bond yields rallied to eight-week highs on both sides of the Pacific, a sign of waning growth expectations. The yield on ten-year Australian government bonds moved above 1.3 per cent for the first time since mid-July.
Lenders rallied in anticipation of improved margin opportunities under higher rates. Consumer staples, REITs and other traditional alternatives to bonds declined.
Asian markets turned mixed in afternoon trade. China’s Shanghai Composite eased 0.08 per cent and Hong Kong’s Hang Seng 0.12 per cent. The Asia Dow trimmed its advance to 0.17 per cent. Japan’s Nikkei rose 0.79 per cent.
Winners’ circle
Macquarie Group flew up 4.69 per cent to an all-time high after reporting it expects this half’s result to be only “slightly” lower than its $2.03 billion profit over the first six months. The company said favourable market conditions in its commodities and international businesses had produced a stronger result than expected. Another positive was the sale of its UK commercial and industrial smart meter portfolio.
Most of the big four banks rallied. CBA climbed 0.76 per cent, NAB 0.63 per cent and Westpac 0.23 per cent. ANZ dipped 0.21 per cent.
Investment group Washington H Soul Pattinson surfed Monday’s profit upgrade 5.61 per cent higher to a new peak. Pokie-maker Aristocrat Leisure also hit a record, rising 0.34 per cent.
Supply-chain logistics specialist Qube climbed 4.59 per cent to a pandemic high after acquiring the Newcastle Agri Terminal (NAT) for $90 million.
Managing Director Paul Digney said, “The acquisition of NAT will further strengthen Qube Agri export bulk service offering to growers and traders the ability to now ship from Newcastle.”
Companies with strong US earnings were shielded from the sell-off by a rally in the US dollar. Transurban firmed 1.19 per cent, ResMed 0.97 per cent and CSL 0.24 per cent.
Doghouse
Gold miners retreated after the yellow metal suffered its biggest setback in a month. Gold for December delivery fell 1.9 per cent overnight as US yields and the greenback rallied.
Westgold Resources fell 4.9 per cent, Silver Lake 4.69 per cent and Newcrest 2.94 per cent. St Barbara dropped 6.09 per cent as it traded ex-dividend.
The big three miners wallowed near multi-month lows as investors weighed declines in industrial metals against a rebound in iron ore. BHP eased 1.02 per cent, Rio Tinto 0.49 per cent and Fortescue Metals 0.39 per cent.
Defensive alternatives to bonds declined. Coles fell 1.58 per cent to a seven-week low. Goodman Group shed 2.06 per cent, Woolworths 1.33 per cent and Wesfarmers 0.21 per cent.
Among companies going ex-dividend, Brambles gave up 1.92 per cent, Blackmores 0.04 per cent, Seek 2.5 per cent, Austal 2.43 per cent and Medibank 2.76 per cent.
Other markets
S&P 500 futures rallied three points or almost 0.1 per cent. Dow futures bounced 33 points or 0.1 per cent.
Oil rebounded late in the session, rising 37 US cents or 0.5 per cent to US$72.07 a barrel.
Gold gave up most of its early gains, lately ahead 40 US cents or 0.02 per cent at US$1,798.90 an ounce.
The dollar dipped 0.03 per cent to 73.84 US cents.
