Join our daily newsletter At The Bell to receive exclusive market insights
Aussie shares fell for a third day as gains in miners were offset by declines in the technology sector and bond proxies.
The S&P/ASX 200 never got out of first gear following a lacklustre session in the US. The local benchmark traded in a 35-point range before reaching mid-session 11 points or 0.2 per cent lower.
What’s driving the market
Financial markets have hit ‘Pause’ after a breakneck recovery from the pandemic lows. On the eve of a new US quarterly reporting season, the pendulum appears to have swung this week from FOMO to concerns stock valuations may have outpaced the earnings outlook. Friday brings the first batch of major profit updates.
Overnight, US stocks closed little changed as investors kept a wary eye on rising borrowing costs and impeachment proceedings against President Donald Trump. The S&P 500 inched up 0.04 per cent. Vice President Mike Pence this morning formally rejected calls to remove Trump from office.
“In the midst of a global pandemic, economic hardship for millions of Americans, and the tragic events of January 6th, now is the time for us to come together, now is the time to heal,” he wrote to House Speaker Nancy Pelosi. “I urge you and every member of Congress to avoid actions that would further divide and inflame the passions of the moment.”
US cyclical sectors such as energy and financials outperformed ahead of President-elect Joe Biden’s stimulus announcement tomorrow night. Both sectors have shone here over the last week. The local energy sector climbed 3.5 per cent this morning to a fresh ten-month high. The financial sector eased 0.2 per cent from yesterday’s ten-month peak.
The local market has fallen into a sideways trading pattern since the post-US election November rally ran out of steam. While US stocks have made fresh highs, the ASX has been stuck in a range between 6585 and around 6760 since early December. Three days of declines this week have merely pulled the index back into the middle of this trading band.
Going up
The new year rally in cyclical stocks continued in expectation of accelerating growth as vaccination programs progress. Energy stocks rose after oil rose for a sixth straight session. Oil Search climbed 6.2 per cent, Woodside Petroleum 5 per cent, Beach Energy 3.5 per cent and Santos 3.4 per cent.
Iron ore majors BHP and Rio Tinto rose for the first time in four sessions. BHP and Fortescue Metals put on 0.6 per cent. Rio added 0.7 per cent.
Gold miner Newcrest advanced 0.9 per cent on news the board approved a $146 million investment in the Havieron joint venture in WA following the receipt of regulatory approvals.
Retail stocks rallied after Premier Investments announced a 75-85 per cent surge in first-half profits. Shares in the group, which owns the Just Jeans, Smiggle and Jay Jays brands, jumped 11.6 per cent. JB Hi-Fi gained 3.3 per cent, Kogan 4.2 per cent and Harvey Norman 3.2 per cent.
The speculative end of the market shrugged off broader market weakness. The S&P/ASX Emerging Companies Index climbed 1.3 per cent. The Small Ords put on 0.2 per cent.
Going down
Tech stocks on both sides of the Pacific have come under pressure amid concerns about the increased borrowing costs as US bond yields probe ten-month highs. Here, Altium slid 5.3 per cent, Nextdc 3.3 per cent and Afterpay 1.2 per cent.
Bond proxies – companies offering predictable, attractive dividend payments – also struggled. Coles sank 2.5 per cent, Transurban 2.1 per cent, Woolworths 2.1 per cent and Goodman Group 2.1 per cent. CSL declined 0.6 per cent.
The financial sector was mixed. Westpac gained 0.2 per cent and ANZ less than 0.1 per cent. NAB fell 0.3 per cent and CBA less than 0.1 per cent.
EFTPOS payments provider Tyro Payments eased 0.4 per cent after announcing it had identified a problem causing connectivity issues for some merchants. The company said the issue affected less than a third of users and it was working to minimise disruption.
Other markets
US futures inched higher. S&P 500 index futures rose a point or less than 0.1 per cent.
A mildly positive morning on Asian markets saw China’s Shanghai Composite rise 0.3 per cent, Hong Kong’s Hang Seng 0.4 per cent and Japan’s Nikkei 0.1 per cent.
Oil pushed towards a seventh day of gains. Brent crude rose 49 cents or 0.9 per cent to $US57.07 a barrel.
Gold rebounded as the US dollar declined. The yellow metal climbed $17 or 0.9 per cent to $US1,861.20 an ounce.
The dollar was steady at 77.74 US cents.
What’s hot today and what’s not
Hot today: Shares in Frontier Resources (ASX:FNT) briefly doubled on news of high-grade rock samples along the eastern boundary of its Tolukuma gold lease in PNG. Sampling to define drilling targets discovered a high-grade segment along the Kimono Central Vein. Additional trench sampling will start later this month. The share price bolted from 1.4 cents to 3.5 cents before trimming their advance to 57.1 per cent at 2.2 cents.
Not today: Some of the heat seeped out of the Red Mountain Mining (ASX:RMX) share price following disappointing drill results. Shares in the metals explorer mysteriously doubled last week from 1.1 cents to 2.2 cents ahead of the release of results from the maiden drilling program at the Mt Maitland Fold Project. Alas, today’s release focussed on plans for Phase II drilling after the first holes delivered only modest results. The share price sank 22.2 per cent to 1.4 cents.
