The Market Herald - At The Bell

Join our daily newsletter At The Bell to receive exclusive market insights

The share market shed early gains after hotter-than-expected inflation data dashed hopes of an interest rate pause.

The S&P/ASX 200 swung from a slim 10-point gain to loss of 20 points or 0.27 per cent after the December-quarter inflation report was released mid-morning.

Utilities, financials and consumer discretionary stocks were the only sectors left in positive territory. Miners and tech stocks were the biggest drags.

What’s driving the market

Tentative hopes that the Reserve Bank might leave benchmark rates on hold next month were wrecked by the final inflation report of 2022. Headline quarterly inflation, core inflation and year-on-year inflation all came in stronger than expected.

The Consumer Price Index (CPI) climbed 1.9 per cent in the December quarter (expected: +1.6 per cent). The trimmed mean or core inflation rose 1.7 per cent (expected: +1.5 per cent). Year-on-year prices were up 7.8 per cent (expected: +7.6 per cent).

“The annual increase for the CPI is the highest since 1990. Annual inflation for goods such as new dwellings and automotive fuel steadied this quarter, however we saw an uptick in inflation for services such as holidays and restaurant meals,” Michelle Marquardt, ABS head of prices statistics, said.

The biggest contributors to rising prices last quarter were travel, holiday accommodation and electricity.

“Today’s inflation report is one that matches Australia’s weather. Hot,” Matt Simpson, senior market analyst at City Index, said.

“Choose your flavour – core CPI, trimmed mean or weighted – they’re all above expectations with no obvious signs of a ‘peak’ in sight. And that has seen any hopes of an RBA pause at their February meeting evaporate.”

The chief economist at IFM Investors, Alex Joiner said, “Another 25bp move in Feb now seems assured.”

The dollar surged 0.5 per cent to 70.86 US cents. The yield on ten-year Australian government bonds reversed early weakness in expectation of higher rates. The ten-year yield bounced more than ten basis points from near 3.35 per cent to 3.47 per cent.

Earlier, the share market shrugged off a mixed night on Wall Street after downbeat corporate forecasts and soft economic data revived recession worries. The S&P 500 eased 0.07 per cent after a technical glitch halted trade in more than 80 companies. The Nasdaq lost 0.27 per cent. The Dow held on for a gain of 0.31 per cent.

“The slight dip noticed overnight on Wall Street was possibly more due to the NYSE opening bell issue, resulting in short-term volatility in stocks. Besides, the market reacted a little to company-specific news, which included lower sales forecast by Johnson & Johnson,” Kunal Sawhney, CEO of research group Kalkine, said.

Going up

Engineering group Monadelphous was the morning’s best performer, rising 4.77 per cent following a broker upgrade. JPMorgan raised its rating on the firm to ‘Overweight’.

Next best were building materials manufacturer Adbri +3.86 per cent and intellectual property group IPH +3.79 per cent. James Hardie, another building materials provider, put on 2.61 per cent.  

Heavyweight gains included Telstra +0.37 per cent, Coles +0.35 per cent and Macquarie Group +0.33 per cent.

A 39 per cent jump in sales in the 27 weeks to year-end lifted footwear retailer Accent Group 9.4 per cent to a 12-month high.  

“Deliveries of fresh new product throughout H1 and in the lead up to Christmas helped to drive higher than expected sales,” CEO Daniel Agostinelli said.

WiseTech inched up 0.18 per cent after acquiring US-based transport management software maker Envase Technologies for $326 million. Envase has more than 1,300 customers in North America, including trucking companies, ports, depots and warehouses. WiseTech founder and CEO Richard White said the acquisition would extend and strengthen the firm’s position in a development priority area.

Going down

A record quarter briefly lifted Woodside Energy before the rot set in. The gas giant increased Q4 production by 0.7 per cent from the prior quarter to 51.6 million barrels of oil equivalent, beating guidance. Revenues declined 12 per cent due to lower realised prices and weaker trading. Production for the calendar year was a record 157.7 million boe. By mid-session, the share price had faded 0.75 per cent

Newcrest shed 1.97 per cent after a 3 per cent drop in gold production last quarter. Output was hampered by a fatality at the Brucejack mine in Canada and drought conditions at Lihir. The company expects to make up the shortfall, reaffirming full-year production guidance.

St Barbara plunged 15.73 per cent after a “disappointing” quarter at the Leonora mine in WA dented production. Gold production from the mine fell to 66,253 ounces for the half year, down from 100,394 over the prior corresponding period. The miner said it remained on track to hit the lower end of production guidance.

Miner Mineral Resources reversed 4.15 per cent from an all-time high after delays in expanding the Mt Marion lithium mine prompted a shipping downgrade. The miner cut its shipping guidance to 250-280 dmt from previous guidance of 300-330 dmt. Costs are expected to increase to $540-$590 per tonne from previous guidance of $460-$510/t.

AMP dipped 0.93 per cent after flagging $68 million impairments in its 2022 result. The impairments include balance sheet adjustments, capitalised cost impairments and the cost of “onerous lease contracts” as the company reduced office space.

“These items do not impact underlying NPAT [net profit after tax] or have a material impact on AMP’s capital position or liquidity,” CEO Alexis George said.

Home fragrance retailer Dusk declined 2.42 per cent after long-serving CEO and Managing Director Peter King resigned.

BNPL junior Laybuy Group crashed 33.33 per cent after calling time on its disastrous time on the boards. The company submitted a formal request to delist, citing weak trading, low liquidity and what the board believes is a share price that does not reflect the company’s fundamentals. Shares that listed at $1.41 in 2020 hit 3.3 cents this morning.

Other markets

A subdued session on Asian markets saw the Asia Dow firm 0.1 per cent and Japan’s Nikkei dip 0.04 per cent. Trade in China and Hong Kong remained suspended for Lunar New Year holidays.

S&P 500 futures slumped 22 points or 0.54 per cent.

Oil clawed back some of last night’s 2.3 per cent decline. Brent crude bounced 26 US cents or 0.3 per cent to US$86.51 a barrel.

Gold built on a nine-month high, rising US$3.20 or 0.17 per cent to US$1,938.60 an ounce.

More From The Market Herald
The Market Herald Video

TMH Market Open: Flat for Friday on the ASX200, Tesla drops on Cybertruck launch

The ASX200 may pull back a bit today – by about .13 per cent, despite the…
The Market Herald Video

TMH Market Close: Late spike sees ASX200 up 0.74 per cent as Industrials sector leads

The ASX200 has closed after a late spike, up 0.74 per cent to 7087.3 points. Industrial stocks…
The Market Herald Video

TMH Market Update: Dwelling approvals rise in October, WA leads

The ASX 200 is just .15 per cent ahead today. Dwelling approvals added 7.5 per cent…
The Market Herald Video

TMH Market Open: ASX200 set to add gains today, Nasdaq & S&P 500 lose momentum

The ASX200 is up about three per cent for November, and it may add just a…