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A resurgence in growth concerns on Wall Street helped drag the ASX towards a possible first loss in four sessions despite records for Macquarie Group and Aristocrat Leisure.
The S&P/ASX 200 declined 20 points or 0.27 per cent by mid-session. Trading followed the recent pattern of early weakness giving way to a recovery. At its low, the index was off 54 points.
An eight-week high in bond yields boosted lenders, but sapped buying interest in alternatives to bonds. Macquarie Group jumped more than 5 per cent after reporting strong trading conditions had persisted into this half.
What’s driving the market
Wall Street wobbled as analysts queued up to downgrade growth expectations in the wake of Friday’s big jobs miss. Goldman Sachs downgraded its full-year GDP target as trade resumed after the Labor Day long weekend.
Morgan Stanley reduced its rating on US equities to ‘Underweight’. JPMorgan Chase predicted a slowdown in growth as the delta variant depresses services sector activity.
The Dow Jones Industrial Average fell 269 points or 0.76 per cent. The S&P 500 shed 0.34 per cent as gains in tech stocks partially offset weakness in cyclical sectors most exposed to any slowdown.
“Market sentiment was battered by a dampened economic outlook amid the continued spread of the coronavirus Delta variant. Meanwhile, the slowing pace of economic recovery was seen to be overshadowing hopes that the central bank will retain its accommodative monetary policy stance for a little longer,” Kalkine Group CEO Kunal Sawhney said.
“In the coming days, investors are expected to continue assessing concerns over increasing virus infections against prospects of Fed maintaining its monetary policy support. Any hawkish stance from the central bank on bond tapering or interest rates may not emerge as welcome news for the stock market,” he added.
Bond yields rallied to eight-week highs on both sides of the Pacific, a sign of waning growth expectations. The yield on ten-year Australian government bonds moved above 1.3 per cent for the first time since mid-July.
Lenders rallied in anticipation of improved margin opportunities under higher rates. Consumer staples, REITs and other traditional alternatives to bonds declined.
Going up
Macquarie Group flew up 5.37 per cent to an all-time high after reporting it expects this half’s result to be only “slightly” lower than its $2.03 billion profit over the first six months. The company said favourable market conditions in its commodities and international businesses had produced a stronger result than expected. Another positive was the sale of its UK commercial and industrial smart meter portfolio.
Most of the big four banks rallied. CBA climbed 0.74 per cent, NAB 0.24 per cent and Westpac 0.15 per cent. ANZ dipped 0.21 per cent.
Investment group Washington H Soul Pattinson surfed Monday’s profit upgrade 5.91 per cent higher to a new peak. Pokie-maker Aristocrat Leisure also hit a record, rising 0.72 per cent.
Companies with strong US earnings were shielded from the sell-off by a rally in the US dollar. Transurban firmed 0.31 per cent. ResMed added 1.37 per cent. CSL hovered just below break-even, down 0.07 per cent.
Going down
Gold miners retreated after the yellow metal suffered its biggest setback in a month. Gold for December delivery fell 1.9 per cent overnight as US yields and the greenback rallied.
Silver Lake Resources fell 4.51 per cent, Northern Star 4.72 per cent and Newcrest 2.41 per cent. St Barbara dropped 6.57 per cent as it traded ex-dividend.
The big three miners wallowed near multi-month lows as investors weighed declines in industrial metals against a rebound in iron ore. BHP eased 0.63 per cent. Rio Tinto lost 0.12 per cent. Fortescue Metals inched up 0.06 per cent.
Defensive alternatives to bonds declined. Coles fell 1.98 per cent to a seven-week low. Goodman Group shed 2.24 per cent, Woolworths 1.13 per cent and Wesfarmers 0.6 per cent.
Among companies going ex-dividend, Brambles gave up 2.16 per cent, Blackmores 1.76 per cent, Seek 2.27 per cent, Austal 3.5 per cent and Medibank 1.52 per cent.
Other markets
US futures edged higher as Asian markets shrugged off last night’s Wall Street woes. The Asia Dow put on 0.58 per cent, China’s Shanghai Composite 0.12 per cent, Hong Kong’s Hang Seng 0.46 per cent and Japan’s Nikkei 0.83 per cent.
S&P 500 futures rallied four points or almost 0.1 per cent.
Gold edged up US$2.80 or 0.16 per cent to US$1,801.30 an ounce. Oil held steady at US$71.69 a barrel.
The dollar bounced 0.1 per cent to 73.93 US cents.
