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Aussie shares fell to two-month lows after selling on Wall Street encouraged investors to trim their exposure ahead of tonight’s Federal Reserve rates call.
The S&P/ASX 200 sagged 90 points or 1.33 per cent to 6716. The reversal unwound all of yesterday’s 86.5 point rebound.
Tech and mining stocks led a retreat that lowered all sectors. Viva Energy was among the index’s best performers after striking a deal to buy the Coles Express network.
What’s driving the market
A risk-averse market slumped back into negative territory for the week after a costs warning from Ford added to market worries as the Fed began a two-day meeting. The US central bank is expected to increase its benchmark rate by at least three-quarters of a percentage point tonight.
The S&P 500 dropped 1.13 per cent after Ford followed FedEx in warning of pressures on earnings as inflation runs hot and supply-chain issues continue.
“FedEx has warned about an impending global recession, and it can be trusted as the logistics company is a big participant in the global supply chain. Any recession cannot be without job losses and subdued wages, which the Fed and everyone else understand,” Kunal Sawhney, CEO of research group Kalkine, said.
With a market holiday tomorrow and Wall Street set to trade twice before the ASX re-opens on Friday, traders exercised caution. This morning’s fall dragged the ASX 200 23 points into the red for the week.
The market has declined for three of the last four weeks amid concerns the war on inflation will tip the global economy into recession. Today’s reversal pulled the index to its lowest level since July 20.
“More or less, all central banks take cues from the Fed’s stance on rates. Now, even the macroeconomic conditions are the same in advanced economies – high inflation, low unemployment, and fears of economic slowdown. In Japan, the UK or Australia, we are set to see either ‘as expected’ or ‘higher-than-expected’ hikes by respective central banks for at least the next six months,” Sawhney said.
Overnight, US treasury yields hit fresh multi-year peaks. Here, the yield on the ten-year government bond climbed seven basis points to 3.717 per cent. The ten-year yield traded briefly below 3 per cent as recently as July before the rates outlook dimmed.
The Australian dollar has fallen victim to a flight to the safety of the US dollar. The Aussie was this morning down 0.16 per cent at 66.84 US cents, near its lowest since May 2020.
Going up
Viva Energy jumped 4.94 per cent on news it will acquire the Coles Express network of convenience stores for $300 million. The deal makes Viva the operator of the largest fuel and convenience network in Australia with 710 sites. Coles shares eased 0.18 per cent.
Investment house Washington H. Soul Pattinson rallied 4.61 per cent after increasing full-year group profit by 154.4 per cent to $834.6 million. The firm said its investments outperformed the All Ordinaries on a pre-tax basis by 20.2 per cent.
Pilbara Minerals climbed 0.72 per cent to an all -time high after securing US$6,988 per dry metric tonne at an auction of of lithium spodumene. The load of 5,000 tonnes attracted 22 bids.
Coal miners continued to outperform. Whitehaven Coal and New Hope both hit records, rising 5.45 and 4.04 per cent, respectively.
Wearable sports tech manufacturer Catapult Group rallied 2.34 per cent after announcing plans to reduce investment expenses to accelerate a return to positive cashflow. The firm said it now expected to be cash flow positive by FY24.
Graphite miner Syrah Resources requested a trading halt while it prepared an announcement regarding labour disruptions at its African mine.
Going down
Link Administration slumped 4.65 per cent after the UK regulator slapped its UK subsidiary with a fine of £50 million ($85 million). The proposed fine follows the collapse of a fund administered by Link Fund Solutions Ltd. The penalty is in addition to a proposed restitution payment of £306 million. The payments have put a takeover offer for Link from Canada’s Dye & Durham under threat.
A 257 per cent surge in full-year net profit to a record $854 million limited Brickworks’ fall to 1.5 per cent. The share price hit a four-week high yesterday in apparent anticipation of a strong result. The firm was responsible for building Amazon’s distribution centre in Sydney.
Engineering group Monadelphous eased 0.42 per cent after winning new contracts and contract extensions worth $160 million.
Bulk metal miners fell as a Covid lockdown in China’s main steel-producing centre weighed on iron ore prices. Ore fell 2.1 per cent on the Dalian Commodity Exchange this morning. Rio Tinto sank 3.82 per cent, Fortescue Metals 2.86 per cent and BHP 2.34 per cent.
Sezzle slipped 5.08 per cent after flagging further cost cuts to help the loss-making payments company edge closer to profitability. The firm said its “average monthly burn” – the gap between income and costs – fell to US$1.9 million this quarter from US$8.1 million 12 months ago.
Other markets
Asian markets took their cues from the US. The Asia Dow retreated 1.49 per cent, China’s Shanghai Composite 0.39 per cent, Hong Kong’s Hang Seng 1.34 per cent and Japan’s Nikkei 1.39 per cent.
US futures steadied. S&P 500 futures edged up 3.5 points or 0.1 per cent.
Oil recouped a portion of last night’s 1.5 per cent decline. Brent crude rallied 20 US cents or 0.2 per cent to US$90.82 a barrel.
Gold bounced US$2 or 0.1 per cent off a two-and-a-half-year low to US$1,673 an ounce.
