ASX Update: Market steadies as miners lead rebound

The share market rose for the fourth time in five sessions as a rebound in resource stocks helped offset weakness in other sectors.

The S&P/ASX 200 swung from an early loss of 28 points to a mid-session gain of 16 points or 0.23 per cent. The reversal helped keep the Australian benchmark on track for a solid weekly gain despite yesterday’s steep sell-off.  

A mixed market saw advances in resource stocks, utilities and property stocks outweigh declines in banks, telecoms and healthcare stocks.

What’s driving the market

The fallout from the Federal Reserve’s hawkish press conference set the tone for a soft start to the session. The mood on financial markets chilled dramatically on Wednesday when the US central bank warned interest rates might have to go higher than previously projected. The ASX 200 slumped 1.84 per cent yesterday to its heaviest loss since mid-September.

“Fed chair’s commentary has now dashed all hopes of any miraculous rebound in the ASX 200 as we approach the close of this tumultuous year, which was all but overshadowed by record-shattering inflation in almost every advanced economy. The Fed chair’s commentary has made the market forget RBA’s tilt toward dovish monetary policy, which is why a broad-based selling was seen on Thursday,” Kunal Sawhney, chief executive of research group Kalkine, said.

The Australian dollar dropped below 63 US cents overnight as the greenback strengthened. The stronger US dollar in turn dampened buying interest in dollar-denominated commodities. US treasury yields climbed, pressuring heavily-weighted megacap tech stocks.

The result was a fourth straight loss for the S&P 500 and Nasdaq Composite. The S&P 500 dropped 1.06 per cent. The Nasdaq gave up 1.73 per cent. The Dow, less burdened by growth companies, attempted a recovery before fading to a loss of 0.46 per cent.

While the outlook for the Australian share market may be superior due to the RBA’s recent dovish pivot towards smaller rate hikes, the market is not immune to the effects of a slowing global economy.

“Higher rates in the US means money flows into US securities, chasing higher returns, and out of lower interest rate economies. A weak currency is ok for an export economy like Australia or Canada because it makes exports more competitive,” Peter Esho, economist at Wealthi, said.

“But you don’t want your currency to fall too hard and too strong because that also brings with it many other pains, like imported inflation and higher debt repayments for situations where debts are dominated in USD.”

The Reserve Bank this morning revealed it expects its preferred measure of inflation – the trimmed mean – to top out at 6.5 per cent next month before fading to 3.75 per cent by the same time next year. The bank acknowledged it does not expect the trimmed mean to fall back within its 2-3 per cent target range until 2025.

One challenge for the bank is resilient consumer demand, which helps fuel higher prices. Retail sales increased by 0.2 per cent across the September quarter, according to an ABS report this morning. While the increase was the smallest since the Covid lockdowns, sales volumes hit a new record.

Going up

Afterpay’s parent company Block jumped 10.43 per cent, pacing after-hours gains in the US listing after the payments company beat earnings and revenue expectations this morning. Revenues increased by 17 per cent for the quarter. Earnings climbed to US$327 million from US$233 million for the same quarter last year.  

Resource stocks provided most of the morning’s best returns following rebounds in iron ore and lithium. Allkem gained 5.68 per cent, Liontown Resources 5.28 per cent and Champion Iron 2.54 per cent. Among the majors, Fortescue Metals firmed 2.03 per cent, Rio Tinto 1 per cent and BHP 1.03 per cent.

Coal miners were also strong. Coronado climbed 6.94 per cent. Whitehaven gained 3.72 per cent.

In the energy space, Woodside rallied 2.93 per cent back towards Wednesday’s four-year peak. Santos tacked on 1.85 per cent.

A 27 per cent lift in half-year net profit to $110 million lifted CSR 4.08 per cent. The building products manufacturer’s trading revenues increased by 14 per cent to $1.3 billion. Shareholders will receive an interim dividend of 16.5 cents, up from 13.5 cents.

Automotive aftercare provider AMA Group popped 16.28 per cent after revising its pricing for its largest customer, Suncorp, and reaffirming full-year guidance. The new pricing package with Suncorp factors in recent cost inflation.

Qantas edged up 0.08 per cent after forecasting a first-half profit of $1.2-$1.3 billion as  revenues surpass pre-Covid levels. CEO Allan Joyce said revenue from leisure bookings was more than 130 per cent above 2019 levels. Business bookings were also higher.

Going down

Under-siege fund manager Magellan fell 3.68 per cent to a fresh nine-year low as net outflows continued. Total funds under management declined by $2.4 billion during October.

Takeover target Pendal slid 0.88 per cent after reporting a 32 per cent drop in full-year net profit to $112.8 million. The fund manager said the decline was largely due to mark-to-market movements on investments. Underlying profit improved by 17 per cent to $194.2 million.

GPT Group reaffirmed full-year guidance. The company expects to distribute 25 cents per security for the year. The share price dipped 0.12 per cent.

Commonwealth Bank fell 1.43 per cent. CSL shed 1.27 per cent, Telstra 1.02 per cent and Coles 0.74 per cent.

Other markets

Asian markets were mixed. Japan’s Nikkei slumped 2.27 per cent as it played catch-up following a public holiday yesterday. The Asia Dow dipped 0.23 per cent. China’s Shanghai Composite put on 0.39 per cent. Hong Kong’s Hang Seng gained 1.37 per cent.

US futures remained underwater. S&P 500 futures dipped two points or 0.06 per cent.

Oil reversed some of last night’s 1.6 per cent loss. Brent crude bounced 13 US cents or 0.14 per cent to US$94.80 a barrel.

Gold rallied off a two-and-a-half year low. The yellow metal rose US$1 or less than 0.1 per cent to US$1,631.90 an ounce.

The dollar bounced 0.18 per cent to 62.99 US cents.