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A week of plain sailing for Australian investors faltered as the big banks switched from tailwinds to headwinds ahead of a White House statement on China.
The S&P/ASX 200 slipped 59 points or 1 per cent to 5793, denting a rally that by yesterday’s close had lifted the index 354 points or 6.4 per cent in four sessions.
The local market followed Wall Street into the red after the White House announced a press conference later tonight to outline President Donald Trump’s response to a new security law in Hong Kong. The S&P 500 faded to a loss of six points or 0.21 per cent after being up as much as 1 per cent. S&P 500 index futures were recently off another 22 points or 0.7 per cent. The US response is expected to include sanctions against Chinese government officials and companies.
This morning’s setback took the edge of what had been the Australian benchmark’s best week of the year. The index would have to close above 5818 this afternoon to better a 320-point rally in early April.
The explosive rally in the big four banks that propelled the week-long surge ran out of puff after yesterday’s charge to two-month highs. Westpac sank 4.7 per cent, NAB 4.5 per cent, ANZ 3.2 per cent and Commonwealth Bank 1.5 per cent. Despite today’s drops, investors were looking at weekly gains of between 10.9 per cent (CBA) and 19 per cent (ANZ).
Eight of 11 sectors declined. Falls ranged from a 2.6 per cent drop in financials to a 0.1 per cent loss in utilities. Communications, technology and materials bucked the downtrend.
Profit-taking appeared to set in among the week’s best performers. British banking group Virgin Money UK shed 8.1 per cent, steelmaker Bluescope 4.5 per cent, European shopping centre operator Unibail-Rodamco-Westfield 4.1 per cent and building supplier Boral 3.5 per cent.
A defensive bias in overnight US trade was largely mirrored here. Northern Star rose 7.6 per cent, Silver Lake Resource 5.1 per cent and St Barbara 5 per cent. Telstra climbed 1.4 per cent to a two-month high.
The crisis in high street retail deepened as PAS Group announced it had entered voluntary administration. The company operates 164 stores under a diverse range of brands including Bondi Bather, Review, Black Pepper and Jets and also sells through department stores. Thorn Group, which operates the Radio Rentals brand, eased 4 per cent after posting an annual net loss of $81.1 million after taking provisions of $35.6 million for the effects of COVID-19.
A subdued morning on Asian markets saw China’s Shanghai Composite inch up 0.1 per cent, Hong Kong’s Hang Seng dip 0.5 per cent and Japan’s Nikkei shed 0.3 per cent.
Oil reversed some of its overnight gains. Brent crude declined 21 cents or 0.6 per cent to $US35.82 a barrel. Gold climbed $3.50 or 0.2 per cent to $US1,731.80 an ounce.
The dollar gained 0.03 per cent at 66.37 US cents.
What’s hot today and what’s not:
Hot today: Boatbuilder Austal (ASX:ASB) cruised higher after raising its earnings guidance. While most listed companies are trimming or offering no guidance due to COVID-19, Austal upgraded its expected earnings before interest and tax from no less than $110 million to no less than $125 million. The company said its outlook had benefited from new contracts, favourable currency movements and a smaller-than-expected hit from the coronavirus. The share price hit a post-pandemic peak of $3.86 before easing to a gain of 6.3 per cent at $3.22.
Not today: The morning brought unpalatable news for investors in Freedom Foods (ASX:FNP). The food manufacturer and distributor warned it expected a material impact on full-year earnings from bad debts, mixed sales and high milk prices. The company also announced a $25 million write-down of the carrying value of inventory. The share price hit a four-year low before trimming its loss to 14.5 per cent at $3.73.
