Join our daily newsletter At The Bell to receive exclusive market insights
The share market slumped to a three-and-a-half-week low after interest rate jitters triggered Wall Street’s worst sell-off in two months.
The S&P/ASX 200 dived 149 points or 2.09 per cent by the halfway mark.
All 11 sectors declined. Just four of the benchmark’s 200 component companies rose. A trading update boosted A2 Milk.
What’s driving the market
US stocks tanked on Friday after the Federal Reserve dashed any hopes of relief next year for interest rates. Chair Jerome Powell made it clear the bank is determined to crush inflation, even if it comes at the expense of economic growth, and by extension, stock prices.
Powell’s eight-minute speech to the Jackson Hole economic symposium overthrew the idea the bank might “pivot” from its current aggressive stance as soon as next year. The Fed Chair warned of “pain” for households and businesses as the Fed maintains “a restrictive policy stance for some time”.
The S&P 500 tumbled 3.37 per cent to its heaviest loss since June. The Dow gave up more than 1,000 points or 3.03 per cent. The Nasdaq shed 3.94 per cent.
“It was pretty much one way traffic down for equities post-Powell, the S&P500 falling from 4,200 to end just above 4,050. IT, the most interest rate sensitive sector, led the overall 3.4% decline,” NAB’s head of FX strategy, Ray Attrill, said.
Adding to market worries, domestic data this morning showed retail sales grew much more than expected last month, increasing pressure on the RBA to keep raising rates. Sales expanded 1.3 per cent in July from the month before, well ahead of the consensus estimate of 0.3 per cent.
“Boosted by higher prices, but despite cost of living pressures consumers are still growing their spending for now. Another +0.5% RBA hike is likely next wk,” AMP’s chief economist Shane Oliver said.
Here, as in the US, growth stocks copped the worst of the sell-off as the cost of long-term borrowing rose. The yield on ten-year Australian government bonds climbed ten basis points to 3.69 per cent.
The ASX I.T. sector skidded 4.3 per cent to a five-week low. Growth sectors such as tech tend to get hit hardest by increased borrowing costs because their valuations reflect their prospects for future profits.
The speculative end of the market also felt the heat. The S&P/ASX Emerging Companies Index slid 3 per cent. The Small Ords sank 3.2 per cent.
Grim US futures doused any prospect of a recovery from the early lows. S&P 500 futures slumped 35 points or 0.86 per cent this morning, suggesting further pain ahead tonight.
Going up
A2 Milk was the morning’s clear winner, rising 7.94 per cent to a five-month high after delivering a positive trading update and announcing a share buyback. The dairy company’s revenues grew 19.8 per cent to $1.446 billion in FY22 as Chinese and US sales expanded.
Net profit jumped 42.3 per cent to $114.7 million. The company will buy back up to $150 million of its shares on-market.
The only other ASX 200 companies to weather the sinking tide were construction materials provider Adbri +2.3 per cent and toll road operators Transurban +0.25 per cent and Atlas Arteria +0.19 per cent.
Outside the index, drilling results lifted Galileo Mining 29.29 per cent. The company said diamond drilling at its Callisto palladium prospect intersected massive sulphide mineralisation containing nickel and copper.
“As there is no known mineralised outcrop, and over five kilometres of prospective strike, we consider that significant potential exists for additional discoveries at shallow depths,” Galileo Managing Director Brad Underwood said.
Jeweller Michael Hill rose 7.8 per cent following a 13.9 per cent increase in full-year profit to $46.7 million. Margins expanded by 200 basis points to 64.7 per cent.
Tyro Payments jumped 8 per cent after improvements in full-year revenue, profit and earnings. Transaction value increased 34.4 per cent.
A 15.2 per cent jump in full-year net profit lifted McMillan Shakespeare 8.98 per cent. Lovisa gained 3.11 per cent after reporting a 59.3 per cent lift in full-year revenue.
Going down
Record iron ore shipments and the second-highest full-year profit in Fortescue Metals‘ history failed to offset market headwinds. The miner shipped 189 million tonnes in FY22, beating guidance.
Underlying earnings grew to US$10.6 billion. Net profit contracted by 40 per cent to US$6.2 billion.
The share price eased 4.3 per cent as Chinese iron ore prices reversed this morning. The most-traded ore contract on the Dalian Commodity Exchange dropped 0.8 per cent. BHP fell 1.8 per cent. Rio Tinto shed 2.5 per cent.
Notable losses within the out-of-favour growth space included Life360 -10.82 per cent, Block -8.02 per cent, Zip Co -8.89 per cent and Imugene -7 per cent.
NextDC slid 7.37 per cent despite beating full-year earnings guidance. The company’s full-year loss contracted to $9.1 million from $23.6 million in FY21.
A tough session for gold miners saw earnings updates go unrewarded. Silver Lake Resources declined 4.26 per cent, Ramelius 4.17 per cent and Northern Star 1.39 per cent.
Among other companies reporting, Waypoint REIT fell 1.16 per cent, Mineral Resources 2.5 per cent, Adore Beauty 11.14 per cent, Charter Hall Retail 0.73 per cent, Grange Resources 21.03 per cent, Aussie Broadband 16.56 per cent, Liberty Finance Group 1.79 per cent, Johns Lyng 5.05 per cent, 29Metals 2.91 per cent and Symbio 5.7 per cent.
Dividend payments also took a toll. Among companies trading ex-dividend today were Coronado -9.67 per cent, Pinnacle Investment -7.81 per cent, Worley-6.78 per cent, Ingenia -5.1 per cent, Challenger -3.49 per cent and Ansell -3.7 per cent.
Other markets
Asian markets followed Wall Street lower. The Asia Dow shed 2.07 per cent. China’s Shanghai Composite gave up 0.63 per cent, Hong Kong’s Hang Seng 0.95 per cent and Japan’s Nikkei 2.76 per cent.
Oil added to last week’s gains. Brent crude climbed US$1.28 or almost 1.3 per cent to US$100.29 a barrel.
Gold sagged US$10.60 or 0.6 per cent to US$1,739.20 an ounce.
The dollar was steady at 68.68 US cents.
