Join our daily newsletter At The Bell to receive exclusive market insights
Australian shares tested four-week lows as investors weighed weak leads from Wall Street, strong gains in commodity prices and the lowest unemployment rate in 13 years.
The S&P/ASX 200 trimmed a 34-point fall to six points or 0.08 per cent at mid-session.
A sharply-divided market saw strong gains in miners outweighed by falls among tech firms, banks and bond proxies.
What’s driving the market
Early optimism fuelled by positive overnight ASX futures action proved unsustainable once the cold reality of heavy falls on Wall Street sank in. The S&P 500 sank 0.97 per cent overnight as upbeat corporate earnings failed to soothe jitters over the interest rate outlook. The rate-sensitive Nasdaq Composite slumped 1.15 per cent into a technical correction.
The share market briefly extended its losses after unexpectedly strong jobs data ramped up pressure on the Reserve Bank to raise the cash rate. Westpac and AMP both tipped rate hikes in August after the unemployment rate fell to 4.2 per cent last month, the lowest reading in more than 13 years.
“This is the lowest unemployment rate since August 2008, just before the start of the Global Financial Crisis and Lehman Brothers collapse, when it was 4.0 per cent. This is also close to the lowest unemployment rate in the monthly series – February 2008 – and for a rate below 4.0 we need to look back to the 1970’s when the survey was quarterly,” Bjorn Jarvis, head of labour statistics at the ABS, said.
Economists had predicted a smaller drop from 4.6 per cent in November to 4.5 per cent. The economy added 64,800 new jobs.
“The Australian jobs market ended 2021 far stronger than the RBA forecast with 4.2% unemployment versus its forecast of 4.75%. While Omicron will cause a brief disruption, jobs mkt strength will likely resume by Mar pushing unemployment below 4% & wages growth up to 3% by yr end,” tweeted AMP economist Shane Oliver.
“As such we continue to see the RBA starting to raise rates later this year, but the risk is increasing that it will come earlier than our forecast for the first rise to be in November.”
Mining stocks outperformed after optimism over further Chinese stimulus efforts sent iron ore and industrial metals sharply higher. The spot ore price regained US$130 a tonne yesterday for the first time since September.
The People’s Bank of China this morning cut its one-year loan prime rate by ten basis points to 3.7 per cent and its five-year rate by five basis points to 4.6 per cent. The cuts are intended to revive economic growth as the nation deals with a severe property slump.
Going up
Gold miners were the morning’s best performers in the wake of a huge rise in US rivals overnight. The NYSE Gold Bugs index of miners soared 7.88 per cent after gold jumped to a two-month high. The Australian gold-mining index jumped 6.9 per cent.
Northern Star soared 10.57 per cent after reaffirming full-year production and costs guidance. The miner generated sales revenue of $950 million last quarter.
A 5 per cent increase in gold poured helped raise Resolute Mining 4.35 per cent. Total calendar-year production was 319,271 ounces, near the bottom of guidance of 315,000 – 340,000 ounces.
Elsewhere in the gold space, Evolution Mining put on 9.58 per cent, Silver Lake Resources 7.54 per cent and Perseus 7.09 per cent. Industry giant Newcrest gained 5.51 per cent.
Iron ore giants BHP and Rio Tinto touched multi-month highs after iron ore rose 2.3 per cent to US$130.20 a tonne and copper gained 2 per cent. BHP climbed 2.81 per cent, Rio 2.77 per cent and Fortescue Metals 3.67 per cent.
Explorer Chalice Mining firmed 6.23 per cent on news drilling had commenced at its Hartog Target within the Julimar Project in WA.
Nickel miner NiCo Resources continued its spectacular start to life as a publicly-listed company. Shares that listed yesterday at 20 cents hit 69.5 cents before paring their rise to 52.78 per cent at 55 cents.
A resource upgrade boosted Rox Resources 38.19 per cent. Appetite for battery material producers lifted American Rare Earths 30.99 per cent. Shares in the company have more than doubled in four sessions.
Buoyant energy prices helped Woodside Petroleum and Santos declare record quarters. Woodside lifted sales revenue 86 per cent last quarter to $2.852 billion. The average realised price per barrel of oil equivalent jumped to $90, an increase of 53 per cent from the previous quarter. Sales volumes increased by 22 per cent.
“We achieved our highest quarterly sales revenue on record,” CEO Meg O’Neill said.
The company is set to acquire BHP’s oil and gas portfolio in the second quarter of this year. The share price firmed 0.51 per cent.
Santos reported record annual production, sales revenue and free cashflow after completing a merger with Oil Search last month. Record production of 92.1 million barrels of oil equivalent included a 1.7 million barrel contribution from Oil Search assets since December 11. The share price inched up 0.07 per cent.
“The completion of the Oil Search merger delivers us the size and scale to deliver even stronger outcomes in 2022 and beyond,” Santos Managing Director and Chief Executive Officer Kevin Gallagher said.
Going down
A record quarter failed to lift Z1p Co far from yesterday’s 20-month low. Shares that traded as high as $10.40 last year hit $3.56 yesterday and $3.58 this morning. The BNPL firm reported record revenue and transaction volumes last quarter. The share price was last down 1.37 per cent at $3.61.
Incitec Pivot dipped 0.29 per cent after reaffirming guidance. The explosives and fertiliser group said strong commodity prices would help offset Covid-affected production and labour issues.
US payments giant Block commenced trade on the ASX at a discount to the US share price. The company formerly known as Square listed on the ASX today after acquiring Afterpay. Shares that closed at $177.58 in the US overnight traded at $175.90 this morning, down 0.7 per cent.
Other drags this morning included the major banks, Wesfarmers and Telstra.
Other markets
A generally positive morning on Asian markets saw the Asia Dow put on 0.69 per cent, China’s Shanghai Composite 0.24 per cent and Hong Kong’s Hang Seng 0.99 per cent. Japan’s Nikkei dropped 0.11 per cent.
S&P 500 futures edged up two points or 0.05 per cent.
Oil fell back from seven-year highs. Brent crude declined 96 US cents or 1.06 per cent to US$87.50 a barrel.
Gold crept up 80 US cents or 0.04 per cent to US$1,844 an ounce.
The dollar rallied 0.39 per cent to 72.44 US cents.
