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The share market retreated ahead of a week of risk events including a Reserve Bank policy meeting and monthly US jobs data.
The S&P/ASX 200 eased 20 points or 0.28 per cent as investors waited to see if Friday’s rebound on global equity markets marked a turning point in recent volatility. A dip in US equity futures discouraged buying.
Gains in tech stocks, REITs and consumer companies were outweighed by declines in the heavily-weighted banking and mining sectors. A profit warning briefly dragged PPE manufacturer Ansell down more than 20 per cent.
What’s driving the market
The local market paused for breath following a week of extreme volatility and at the start of one that could reset the domestic rates outlook for the next few years. Investors were reluctant to push the ASX 200 higher following its biggest rise since March 2020. The index jumped 2.2 per cent on Friday.
The Reserve Bank gathers tomorrow for a policy meeting that will reveal how seriously the bank views recent gains in employment and inflation.
“The RBA will likely stop bond buying at its meeting in the week ahead and like other central banks pivot hawkish on rates,” AMP chief economist Shane Oliver said.
“RBA forward guidance that a rate hike is unlikely until 2024, possible in 2023 but not in 2022 was based on ‘data and forecasts’ that the conditions for a rate hike – namely inflation sustainably in the target range, full employment and wage growth of 3% or more – would not be met this year.
“As it turns out key data for jobs and inflation have been far stronger than expected and its forecasts for both will likely have to be revised up so its guidance on the start of rate hikes will have to be brought forward.”
Oliver and other economists, including Westpac’s Bill Evans, expect the central bank will wait until at least August before raising the cash rate.
“Our base case remains for the first hike to come in August followed by another in September taking the cash rate to 0.5%,” Oliver added.
The Australian dollar fell to a 19-month low on Friday, burdened by weak Chinese growth and the superior rates outlook in the US. The Aussie fell as low as 69.67 US cents and was lately up 0.07 per cent at 70.01 US cents.
Investors will look for signs of stability on global equity markets this week following an explosion in volatility. The S&P 500 in the US swung through a range of at least 2.25 per cent every session last week.
S&P 500 futures declined 13.5 points or 0.3 per cent this morning. Dow futures eased 95 points or 0.27 per cent.
“This week will be all about whether the correction low is already in or whether last Monday’s intra-day low is again challenged and breached,” Jim Paulsen, Leuthold Group chief investment strategist, said. “The longer the S&P stays above last Monday’s low or moves even further away on the upside, the more that calm will return and fundamentals may again start to dominate emotions in driving the market.”
US stocks rebounded after a record quarter from Apple soothed market worries about highly-priced tech giants. The Nasdaq Composite soared 3.13 per cent. The S&P 500 jumped 2.43 per cent and the Dow 1.65 per cent.
Going up
Afterpay-parent company Block was the best of the heavyweights, bouncing 6.95 per cent in the wake of Friday’s 3.13 per cent Nasdaq rebound. The rally followed a ratings upgrade from Morningstar. Rival Z1p Co climbed 6.12 per cent.
Heavyweight gains included Goodman Group +1.4 per cent, Aristocrat Leisure +1.4 per cent, CSL +0.65 per cent and Woodside +0.64 per cent.
Tech movers included Appen +5.86 per cent, WiseTech +4.45 per cent and EML Payments +3.15 per cent.
A 91 per cent year-on-year surge in Q2 natural gas revenue lifted Origin Energy 1.72 per cent. The result was driven by strong oil and liquefied natural gas prices and favourable currency movements.
Data centre operator NEXTDC announced recent contract wins had boosted utilisation by 7.3 per cent. Most of the revenue will be recognised next financial year. The share price improved 1.83 per cent.
Newly-listed Firebrick Pharma continued its impressive start to listed life, climbing 23.58 per cent. Shares that listed at 20 cents on Friday hit 75 cents this morning.
Data services provider Veris jumped 27.12 per cent after agreeing to sell Telstra its Aqura Technologies subsidiary for $30 million in cash. Telstra faded 0.63 per cent.
Going down
Ansell briefly lost a fifth of its market value after an unexpected profit warning. The personal protection safety specialist cut its full-year outlook, citing margin pressure, weakening demand and pandemic-induced production issues.
Full-year earnings per share was downgraded to between $1.25-$1.45 per share from November guidance of $1.75-$1.95. The company will provide a further update when it releases half-year results on February 15. The share price slumped to its lowest since March 2020 before halving its fall to 11.97 per cent.
BHP dropped 2.3 per cent after reunifying its corporate structure in Australia. The end of the company’s dual listing in the UK means the Big Australian increases its ASX 200 index weighting to just below 11 per cent.
CBA dipped 1.66 per cent after warning its insurance business will take a loss of $85 million for the half year. The loss reflects costs from claims for hail and storm events on the east coast, SA and Tasmania in October. ANZ shed 2.44 per cent, NAB 1.84 per cent and Westpac 1.38 per cent.
A 21 per cent increase in half-year revenue kept nickel miner IGO Ltd near record levels. The group generated a profit of $90.7 million on revenue of $377.2 million. The share price eased 2.78 per cent after hitting an all-time high earlier this month.
Shares in Perseus wilted 1.53 per cent following news the gold miner will acquire a 15 per cent interest in Canadian-listed Orca Gold from Resolute Mining. Orca has projects in Africa. Perseus said the acquisition was consistent with the miner’s plan to build a “platform of long life, highly profitable African gold assets”.
NIB Holdings sagged 6.71 per cent following a broker downgrade from JPMorgan. Other notable falls included OZ Minerals -3.81 per cent and Imugene -4.76 per cent.
Other markets
A mixed morning on Asian markets saw the Asia Dow gain 0.08 per cent and Japan’s Nikkei 0.69 per cent. Hong Kong’s Hang Seng gave up 0.2 per cent. Trade on mainland Chinese markets was suspended for the week-long Lunar New Year break.
Oil showed no sign of pressure ahead of this week’s OPEC+ meeting. Brent crude firmed US$1.20 or 1.36 per cent to US$89.72 a barrel.
Gold bounced US$1.50 or 0.1 per cent off a six-week low to US$1,788.10 an ounce.
