Join our daily newsletter At The Bell to receive exclusive market insights
The share market slid towards its first loss in four sessions as resource stocks tilted lower and Reserve Bank Governor Philip Lowe downplayed the likelihood of further rate cuts.
The ASX 200 declined 40 points or 0.6 per cent to 7009 by mid-session, erasing the benchmark index’s slender gain for the week. A volatile five-day run saw a heavy fall on Monday amid fears of the impact of the coronavirus on in-bound tourism and overseas demand for domestic produce and materials, followed by a strong three-day rebound as US stocks surged to fresh highs. Overnight, the S&P 500 rose 11 points or 0.33 per cent to a record.
The local market never looked like matching US gains, stumbling out of the starting blocks after RBA Governor Lowe said he expected rates to rise as inflation picks up and the labour market improves. Lowe also dismissed the prospect that Australia might follow other nations by indulging in quantitative easing or negative interest rates.
“Our central forecast is that economic growth in Australia will pick up from an average rate of 2 per cent over the past couple of years to two-and-three-quarters per cent this year and 3 per cent over 2021,” he told the House of Representatives Standing Committee on Economics. He added: “Negative interest rates in Australia are extraordinarily unlikely. This is not a direction we need to go in… Australia’s financial markets are currently operating normally, so there is no need for any special liquidity operations.”
Risks to the RBA’s outlook included a flare-up of US-China trade tensions, the impact of the coronavirus and the recent bushfires and drought. Lowe said the rebuilding effort this year was expected to offset the hit to GDP from the bushfires. A quarterly monetary policy issued later in the morning indicated the central bank expects the jobless rate to fall to 4.8 per cent by mid-2022 as consumer inflation reaches 2 per cent.
A two-day respite for the energy sector gave way to further selling after Brent crude dropped overnight. Beach Energy fell 3.4 per cent, Woodside 1.6 per cent and Santos 1.1 per cent. Brent crude bounced 39 cents or 0.7 per cent this morning to $US55.30 a barrel.
A rebound in the big iron ore miners also flagged following overnight declines in the US for BHP and Rio Tinto. BHP eased 1.6 per cent, Rio Tinto 0.6 per cent and Fortescue 2.6 per cent. Telstra was another drag, sliding 1.3 per cent to its lowest level in almost a month.
The year’s best performers on the index continued to shine. Coles climbed 1.6 per cent to a new record. Woolworths also had a new all-time closing high within reach with a rise of 0.7 per cent. CSL moved past yesterday’s record close but was lately back to even. New Corp edged up 1.9 per cent despite declaring declines in quarterly profit and revenue.
Asian
markets faded. China’s Shanghai Composite shed 0.22 per cent,
Hong Kong’s Hang Seng 0.52 per cent and Japan’s Nikkei 0.22 per cent. S&P
500 index futures declined two points or almost 0.1 per cent.
Gold improved 60 cents or less than 0.1
per cent to $US1,570.60 an ounce.
The dollar retreated 0.2 per cent to 67.17 US cents.
What’s hot today and what’s not:
Hot today: shares in outdoor retailer Kathmandu (ASX: KMD) hit their highest level in almost six years as online sales growth and the acquisition of surf brand Rip Curl fuelled a 40 per cent lift in half-year pre-tax earnings on the same time last year. Improvements to the online platform helped increase online sales by 30 per cent. The company said it was monitoring its Chinese supply chain but was comfortable it had plans in place to mitigate against disruptions cause by the coronavirus. Shares in the NZ retailer jumped 10 per cent to their highest level since May 2014.
Not today: Lithium miners have enjoyed a strong week as the parabolic rise of Elon Musk’s Tesla stoked a rebound in a sub-sector that had been in decline for two years. While current valuations are a far cry from the heady heights of January 2018, the hype around Tesla provided a welcome boost for the likes of Orocobre (ASX: ORE), Galaxy Resources (ASX: GXY) and Pilbara Minerals (ASX:PLS). Alas, Wednesday’s sharp retrace in Musk’s electric vehicle maker proved the cue for a round of profit-taking here. Orocobe and Galaxy were the index’s worst performers today, falling 6.8 per cent and 4.3 per cent, respectively. Pilbara Minerals dipped 2.3 per cent.
