A winning week for Australian stocks faded towards a soft finish as the mining sector fell from a nine-year high and the banks unwound yesterday's rally.
The S&P/ASX 200 declined 37 points or 0.6 per cent this morning, trimming its tally for the week to around 75 points or 1.3 per cent. A sharp rebound on Tuesday accounted for most of the gains from a stop-start week when the index moved in a different direction each session.
Local investors ignored a technology-fuelled overnight rally on Wall Street that left behind the materials and financials sectors, the twin pillars of the ASX. The S&P 500 put on 0.64 per cent and the Nasdaq 1 per cent. Facebook and Amazon were major contributors to both gains. The US materials sector slid 0.42 per cent and the financial sector 0.15 per cent.
The ASX has been left behind by a US rally that has become increasingly dependent on a handful of global technology stocks whose business models have proved resilient in lockdown. While the Nasdaq has made record highs each session this week, the Dow Jones Industrial Average finished last night roughly 7 per cent off its pre-pandemic peak. The S&P/ASX 200, which is heavily weighted towards mining and bank stocks exposed to the full economic impact of the pandemic, was today some 16.6 per cent away from its February peak.
A strong week for commodity markets lifted the Australian materials sector yesterday to its best close since April 2011. The sector retreated 1.2 per cent this morning despite a 12-month peak in iron ore and a fifth straight record close in gold. BHP dipped 0.9 per cent, Rio Tinto 2.5 per cent and Fortescue 2 per cent. Gold leader Newcrest shed 1.1 per cent.
The financial sector has been the biggest drag on the index this week as fresh border closures and record COVID-19 infections in Victoria stoked fires of a wave of bad debts. CBA eased 0.7 per cent today, ANZ 0.5 per cent, NAB 1.1 per cent and Westpac 0.3 per cent.
News Corp jumped 5.5 per cent to its strongest level since February despite reporting a US$1.5 billion loss after writing down the value of Foxtel and its American marketing wing. Insurer IAG slid 0.8 per cent after unveiling a 59.6 per cent slump in full-year net profit to $435 million following a summer of bushfires and floods and the arrival of COVID-19.
Theme park operator Ardent Leisure surged 9.9 per cent as investors welcomed a financial assistance package from the Queensland government. Cinema and theme park operator Village Roadshow inched up 1 per cent after securing a takeover offer from private-equity suitor BGH Capital.
US index futures faded as a sell-off on Asian markets accelerated. S&P 500 index futures dropped 11 points or 0.3 per cent. China's Shanghai Composite gave up 1.4 per cent, Hong Kong's Hang Seng 1.6 per cent and Japan's Nikkei 0.6 per cent.
Oil extended overnight losses. Brent crude slipped five cents or 0.1 per cent this morning to $US45.04 a barrel. Gold climbed another $8.30 or 0.4 per cent to $US2,077.70 an ounce.
The dollar eased 0.26 per cent to 72.14 US cents.
What's hot today and what's not:
Hot today: News of a fast-track designation that could ultimately be worth up to US$350 million sent shares in biotech Kazia Therapeutics (ASX:KZA) to a three-and-a-half-year high. Kazia announced its treatment for a rare and aggressive childhood brain cancer had been awarded a Rare Pediatric Disease Designation (RPDD) by the US Food and Drug Administration. The company may now be eligible to receive a RPDD Priority Review Voucher (PRV) that would shave six months off the review process. PRVs are so valuable to large pharmaceutical companies that they have commanded prices of US$68 - US$350 million, according to Kazia. The company's share price shot up 52.7 per cent on the news.
Not today: One of this year's big winners, Australian Ethical Investment (ASX:AEF), tumbled after money manager IOOF Holdings (ASX:IFL) sold most of its stake in the listed superannuation fund. IOOF sold 14.2 million shares, leaving it with 5.5 million shares or 4.9 per cent of AEF. The sale realised $74.5 million for IOOF, which will use the funds to reduce debt and target growth opportunities. Shares in AEF had more than doubled from $3.84 at the start of the year to above $9 in June. The share price tanked 15 per cent this morning to $5.09.