Join our daily newsletter At The Bell to receive exclusive market insights
Australian shares slumped for a fourth session following a string of earnings disappointments, weak leads from Wall Street and unexpectedly soft October employment data.
The S&P/ASX 200 briefly trimmed its losses after a mid-morning report showed unemployment surged more than expected as the economy shed jobs for a third month. The index quickly extended its decline to 61 points or 0.82 per cent by mid-session.
Ten out of eleven sectors retreated, led by tech and healthcare. The materials sector rallied as the iron ore majors bounced off multi-month lows.
What’s driving the market
The dollar slumped and stocks temporarily pared their falls as October jobs data appeared to relieve pressure on the Reserve Bank to raise rates. The jobless rate jumped to 5.2 per cent from 4.6 per cent in September. Total employment declined by 46,300.
Both figures were considerably worse than economists predicted. The consensus was for a much smaller increase in the unemployment rate to 4.8 per cent as the economy added around 50,000 jobs.
However, economists were quick to point out last month’s survey was taken earlier than usual, at a time when the eastern states were still effectively in lockdown. AMP’s Shane Oliver said employment should rebound strongly in November.
Relief for the stock market proved short-lived. Within 15 minutes, stocks were lower than where they were pre-announcement. Bond yields also shook off a quick dip, rising almost ten basis points to 1.842 per cent. The dollar retained most of its drop, lately down 0.17 per cent at 73.21 US cents.
Inflation is back at the top of investors’ list of concerns following “hot” reports from both China and the US. Overnight, the S&P 500 declined 0.82 per cent after consumer prices recorded their strongest annual increase in 31 years.
“The market was expecting an acceleration in US inflation numbers, in the end however the increases were larger than expected with the headline and Core readings printing at new multi-decade highs,” NAB currency strategist Rodrigo Catril said. “The headline October CPI rose 0.9%, well above the consensus, 0.6% while the core rose 0.6%, above the consensus, 0.4%.
“Supply constraints may well turn out to be transitory, but the rise in core drivers increases the pressure on the Fed to trigger a monetary policy response,” he added. “The Fed’s resolve is facing a testing time, an increase in labour participation is needed to reduce upward pressure on wages while there is also a need for an increase in productivity.”
Going up
Fortescue Metals led a rebound in the iron ore majors from multi-month lows, rising 8.3 per cent. Rio Tinto climbed 1.37 per cent and BHP 1.79 per cent.
Gold miners surged after the yellow metal logged its highest close since June. Regis Resources gained 4.48 per cent, Ramelius 3.78 per cent, Perseus 3.32 per cent and Newcrest 1.51 per cent.
Chalice Mining was on track to be among the index’s best performers for a third session since declaring it had found the biggest nickel sulphide deposit in Australia in 20 years. The miner’s shares gained 6.79 per cent.
Nine Entertainment climbed 3.38 per cent after upgrading the outlook for its publishing arm. The media group said its expected full-year earnings from the division to be between $40 and $45 million, up from previous guidance of $30-$40 million. However, CEO Mike Sneesby said it was too early to offer full-year guidance for the group despite “positive” signs.
Going down
Disruption from Covid-19 and a blowout in costs dented first-quarter earnings at Ramsay Health Care. Shares in the private hospital operator sank 4.57 per cent after the company warned unaudited earnings were 27.8 per cent lower than the same quarter last year. Unaudited profit fell 39.5 per cent.
Accounting software provider Xero sagged 4.93 per cent after reporting a half-year loss of NZ$5.9 million. The company said the loss reflected increased investment in sales, marketing and product development. Operating revenue increased 23 per cent year on year and total subscribers expanded by 23 per cent to three million.
Beach Energy dropped 2.91 per cent, broadly in line with rivals, after reaffirming it remained on track for its 2024 financial-year target of producing 28 million barrels of oil equivalent. The company intends to have eight gas plants by the end of 2023.
Woodside Petroleum declined 3 per cent, Santos 2.02 per cent and Oil Search 1.42 per cent.
A full-year net loss of $174 million sent shares in explosives manufacturer Orica down 3.78 per cent. Underlying earnings slumped 30 per cent as the company struggled against negative currency movements, increased shipping costs, rising input costs and the impact of trade tensions with China.
Nearmap slumped 10.7 per cent as investors sniffed at the aerial mapping group’s full-year guidance. The company expects annual contract value of between $150 and $160 million on a constant currency basis. The guidance fell short of the company’s long-term growth target of 20-40 per cent.
GrainCorp fell 3.44 per cent after reporting a return to profit. Underlying profit swung from a loss of $16 million in FY20 to $139 million last financial year. Managing Director and CEO Robert Spurway said the result was at the top end of guidance.
The big four banks declined. CBA shed 2.08 per cent, ANZ 0.36 per cent, NAB 1.99 per cent and Westpac 0.04 per cent.
Defensive stocks also came under pressure. CSL gave up 2.7 per cent, Transurban 1.67 per cent, Coles 1.19 per cent and Wesfarmers 1.72 per cent.
Other markets
Asian markets were mixed. The Asia Dow shed 0.15 per cent and Hong Kong’s Hang Seng 0.48 per cent. Japan’s Nikkei gained 0.57 per cent and China’s Shanghai Composite 0.3 per cent.
US futures turned tentatively positive. S&P 500 futures rose 4.5 points or 0.1 per cent.
Oil trimmed some of its overnight loss. Brent crude rallied 35 US cents or 0.42 per cent to US$82.99 a barrel.
Gold firmed US$2.60 or 0.14 per cent to US$1,850.90 an ounce.
