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Shares declined for a second session as the Democrats took an early lead in a crucial US Senate election and a falling greenback weighed on companies with significant US earnings.
The S&P/ASX 200 slumped 72 points or 1.1 per cent by mid-session. Gains for energy stocks after a surge in crude oil were outweighed by declines across the rest of the market.
What’s driving the market
Positive leads from Wall Street and commodity markets were overshadowed by declining US futures following a Reuters report of early Democrat success in a Georgia state election that will determine control of the Senate. The initial results were reportedly from Democrat-leaning counties.
S&P 500 futures skidded 16 points or 0.4 per cent. Overnight, the S&P 500 rose 0.71 per cent, recouping around half of Monday’s loss.
Here, exporters and other currency-sensitive operators wilted. The Aussie climbed more than 1 per cent overnight to 77.78 US cents, a level last seen in April 2018. Strength in the dollar offers overseas investors windfall profits from currency movements. Interest in yield stocks was depressed by an uptick in US treasury yields.
Healthcare stocks with significant US operations were among the biggest drags. CSL sank 2.1 per cent, Sonic Healthcare 1.8 per cent and Cochlear 1.9 per cent.
Going up
Energy was the only sector to resist the downtrend, rising 0.7 per cent after surprise Saudi production cuts helped US crude crack US$50 a barrel for the first time since the start of the pandemic. Saudi Arabia agreed to reduce its output by a million barrels a day during February and March while OPEC+ partners Russia and Kazakhstan raised their production by a combined 75,000 barrels a day.
“Oil is a function of the rest of the world recovering and a look to where we’re going,” Tim Seymour, founder of Seymour Asset Management, told CNBC.
Oil Search climbed 3.8 per cent, Beach Energy 1.7 per cent and Santos 1.2 per cent. Sector giant Woodside Petroleum put on 1 per cent.
The wider mining sector was mixed. Fortescue Metals climbed 0.2 per cent to a new record. BHP gave up 0.7 per cent and Rio Tinto 1.6 per cent. Nickel and copper miner IGO gained 3.3 per cent and mining services provider Mineral Resources 0.5 per cent.
Travel and tourism stocks were mixed as Covid case numbers in NSW and Victoria remained low. NSW reported four new local cases this morning. Victoria recorded one case. Corporate Travel Management gained 1 per cent. Webjet and Flight Centre were flat after giving up early gains. Qantas eased 0.4 per cent after opening bookings for international travel from July 1.
Insurer IAG rose 0.5 per cent from a three-month low after finalising its catastrophe reinsurance cover at a modest increase. The company said the overall expense was in line with expectations.
Going down
While healthcare took the biggest hit, tech and yield stocks also weighed. In the tech space, Afterpay sank 5.7 per cent, Nanosonics 6.8 per cent and Bravura Solutions 4.1 per cent. Goodman Group shed 1.8 per cent, Woolworths 1.8 per cent and Coles 1.8 per cent. Transurban, which has US toll roads, fell 1.4 per cent. Aristocrat Leisure, another firm reliant on US dollar earnings, fell 1 per cent.
Financials also retreated. Macquarie Group dropped 2.7 per cent. CBA fell 1.1 per cent, ANZ 1.4 per cent, NAB 1.7 per cent and Westpac 1.5 per cent.
Packaging group Amcor dropped 2.2 per cent following a broker downgrade. Retail group Premier Investments dipped 4.7 per cent as it traded without its dividend.
Other markets
Oil added to an overnight rally that lifted prices to their highest level since February. Brent crude advanced 23 cents or 0.4 per cent to $US53.81 a barrel. Gold slid 70 cents or less than 0.1 per cent to $US1,953.70 an ounce.
A flat morning on Asian markets saw China’s Shanghai Composite ahead 0.1 per cent, Hong Kong’s Hang Seng down 0.1 per cent and Japan’s Nikkei down 0.2 per cent.
The dollar eased 0.16 per cent this morning to 77.51 US cents.
What’s hot today and what’s not
Hot today: Explorer Elementos (ASX:ELT) touched a three-year high on progress at its low-cost Spanish tin project. Early drill results intersected significant mineralisation at the Oropesa project. The drilling program is intended to convert “inferred” resources into “indicated” resources to support the case for a mine. An economic study last year proposed a mine producing 2,440 tonnes of tin concentrate over 14 years. The share price jumped 37.5 per cent today to 1.1 cents.
Not today: Infection prevention specialist Nanosonics (ASX:NAN) has been in retreat since hitting an all-time high on Monday. Profit-taking after the share price surged 63 per cent in two months has likely been compounded by currency and Covid concerns. The company is heavily dependent on US earnings at a time when the greenback is under pressure. Earnings also depend on a resumption of normal hospital activity in the US, no longer a given as a more contagious strain of Covid-19 spreads. The share price fell 6.8 per cent today to a three-week low.
