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Australian shares fell for the first time in three sessions as record results from energy giants Woodside and Santos were overshadowed by weak jobs data and renewed worries about rising rates.
The S&P/ASX 200 dropped 78 points or 1.14 per cent by mid-session. The market added to its loss after September jobs figures fell short of expectations.
Growth stocks led the sell-off as borrowing costs pushed higher. Woodside and Santos bucked the downtrend after posting record sales last quarter.
What’s driving the market
Australian stocks tracked declines on Wall Street as the cost of borrowing resumed its relentless rise this year. US stocks fell after the yield on ten-year US treasuries hit a 14-year high. The S&P 500 dropped 0.67 per cent.
Here, the Australian ten-year yield climbed 12 basis points to 4.08 per cent. ASX trading volumes have fallen sharply this year as investors switch to the attractive returns available from fixed income markets with lower risk.
“There is significantly less demand for stocks now because more demand is out there – just beginning – for Treasuries,” Matthew Zambito, founder of SqueezeMetrics, told Bloomberg. “People are reaching for that risk-free yield and are deciding not to put more cash in stocks.”
The dollar dropped 0.25 per cent to 62.48 US cents after jobs data showed total employment increased by an anaemic 900 positions last month. Economists had forecast significantly stronger growth of around 25,000. The unemployment rate held steady at 3.5 per cent. Participation rates were also unchanged.
“Very early days but maybe we have seen the best of employment gains despite vacancy numbers as labour market frictions slow the rate of gains. At the same time labour supply continues to accelerate as borders reopen,” Alex Joiner, chief economist at IFM Investors, tweeted.
AMP’s chief economist Shane Oliver said the figures pointed to another rate increase of a quarter of a percentage point next month.
“The jobs mkt remains tight consistent with the RBA hiking again next mth but it’s showing signs of slowing so it’s likely to stick to +0.25%,” Oliver said.
Going up
Energy was the only sector to resist the chill wind blowing from bond markets. Woodside jumped 4.99 per cent after the acquisition of BHP’s petroleum business fuelled record sales, revenue and production last quarter.
Production increased 52 per cent from Q2 FY22, sales volumes 59 per cent and revenue 70 per cent. The firm raised its full-year production guidance to 153-157 million barrels of oil equivalent.
“This is our first full quarter following the merger and these results demonstrate the new, expanded Woodside is delivering what we promised,” Woodside CEO Meg O’Neill said.
Santos also posted record sales revenue in a result supercharged by rising gas prices. Year-to-date sales revenue of US$5.9 billion was up 86 per cent on the prior corresponding period.
The firm also delivered record free cash flow of US$2.7 billion this year, an increase of 194 per cent. Third-quarter sales volumes increased by 9 per cent. The share price rose 2.03 per cent.
Battery metals supplier Novonix soared 11.27 per cent after being chosen as a candidate for a US$150 million grant. The firm was selected to negotiate for funding from the US Department of Energy. The grant is part of President Joe Biden’s plan to expand domestic manufacturing of electric batteries.
Fund manager Challenger rallied 2.78 per cent after selling its banking business for $36 million to New Zealand’s Heartland Group. CEO Nick Hamilton said the sale would allow the firm to focus on its Life and Funds Management businesses. The company reaffirmed its full-year guidance.
Buy now pay later firm Zip Co climbed 4.3 per cent after reporting a 19 per cent year-on-year increase in quarterly revenue. Transaction volumes increased 15 per cent. Credit losses declined.
Going down
Growth stocks led the retreat as market rates climbed. Afterpay’s US parent company Block slumped 8.48 per cent, Megaport 8.02 per cent and Telix Pharmaceuticals 5.91 per cent. Xero shed 5.33 per cent, BrainChip 5.98 per cent and Altium 4.59 per cent.
Gold miners sank after a rampant greenback helped drive the yellow metal to a three-week low. Evolution Mining fell 9.58 per cent after reporting a dip in production last quarter and an increase in costs following planned plant maintenance shutdowns. The miner reaffirmed its full-year guidance.
Silver Lake Resources dropped 5.15 per cent despite upgrading its mineral resource and ore reserves. The miner raised its ore reserves by 17 per cent and its mineral resources by 26 per cent.
Sector heavyweight Newcrest sagged 3.39 per cent. The major bulk metal miners fell between 1.6 and 2.6 per cent.
Other heavyweight drags included Macquarie Group -3.25 per cent, James Hardie -2.5 per cent, toll road operator Transurban -2.37 per cent and retail conglomerate Wesfarmers -2.13 per cent.
Declines in key metrics drove creatives marketplace Redbubble down 23.61 per cent to a two-and-a-half year low. Revenues declined 5 per cent last quarter, profit 7 per cent and margins 90 basis points.
Atlas Arteria eased 2.1 per cent on news traffic volumes on its toll roads dipped 2 per cent in the third quarter.
Other markets
US futures faded as Tesla fell in after-market trade after reporting this morning. S&P 500 futures dropped 28 points or 0.76 per cent. Tesla sank 6.3 per cent in extended night trade.
A dour morning on Asian markets saw the Asia Dow shed 1.35 per cent, China’s Shanghai Composite 0.5 per cent, Hong Kong’s Hang Seng 1.7 per cent and Japan’s Nikkei 1.22 per cent.
Oil pared its first gain in four sessions. Brent crude reversed 17 US cents or 0.2 per cent to US$92.24 a barrel.
Gold continued to test three-week lows. The yellow metal eased US$4.60 or 0.3 per cent to US$1,629.60 an ounce.
