Tech and property stocks kept the share market ahead as sharp falls in commodity prices weighed on resource stocks.
The S&P/ASX 200 spent much of the the morning in a holding pattern as financial markets marked time ahead of tonight’s potentially explosive US inflation update. The Australian benchmark was ahead four points or 0.06 per cent mid-session.
Real estate investment trusts, tech firms and travel stocks advanced. The energy and materials sectors dragged after crude oil, iron ore and several metals marked multi-month lows.
What’s driving the market
Aussie shares drifted for a second day with investors reluctant to add or subtract from positions until the market clears several risk events. Tonight’s June US inflation report has the capacity to move the needle on the interest rate outlook for better or worse.
A significant decline in consumer prices would reduce pressure on the Federal Reserve for another jumbo rate hike this month. A “hot” result would lock in another 75 basis points increase.
A busy morning for central bank action saw the Royal Bank of New Zealand raise its benchmark rate by 50 basis points to 2.5 per cent. Bank of Korea also increased its key interest rate by 50 bp, to 1.75 per cent. The Bank of Canada was expected to raise its benchmark by 75 bp tonight.
A new US corporate reporting season got underway this week and will help set the tone on Wall Street for the next few months. Most of the major banks report later this week.
Overnight, US stocks fell away in the final hour of trade as investors reduced their exposure. The S&P 500 dropped 0.92 per cent.
“Energy stocks led the sell-off on Wall Street as crude oil declined more than 7%, tracking increasing Covid cases in China. Meanwhile, the US dollar, which hit its highest since March 2020, weighed on metal prices,” Kunal Sawhney, chief executive of research group Kalkine, said.
“The US dollar’s strength is a risk for corporate earnings. Investors’ flight to the world’s relatively safe reserve currency indicates that they are worried about the world’s economic outlook amid rising inflation and interest rates.”
Other “risk-off” moves overnight included declines in cryptocurrencies. Bitcoin fell back under US$20,000. The largest of the cryptocurrencies was lately trading at US$19,485.
Brent crude slumped below US$100 a barrel as an up-tick in Covid restrictions in China sharpened demand worries. The international oil benchmark bounced 41 US cents or 0.4 per cent this morning to US$99.90 after tumbling 7.1 per cent overnight.
Tech stocks rose for the first time this week as the cost of long-term borrowing on bond markets retreated. Megaport bounced 6.83 per cent, Block 3.21 per cent and BrainChip 3.18 per cent.
Travel stocks rallied as fuel costs declined. Qantas gained 3.07 per cent after US carrier American Airlines forecast its first profitable quarter since the start of the pandemic.
Corporate Travel Management put on 1.07 per cent on the prospect of cheaper travel as fuel costs fall from elevated levels. Webjet climbed 1.31 per cent. Flight Centre added 0.52 per cent.
Traditional havens such as property stocks attracted a bid. Centuria Capital firmed 3.17 per cent, Charter Hall Group 2.17 per cent and Goodman Group 2.04 per cent.
Other defensives to nudge higher included Telstra +0.39 per cent, Transurban +0.35 per cent and CSL +0.14 per cent.
KMD Brands, the outdoor sports retailer that owns Kathmandu and Rip Curl, firmed 1.99 per cent after warning Covid continued to impact footfall and trigger sporadic store closures. A record winter promotional period in Australia and strong margins helped offset weakness in the NZ operation.
Energy stocks fell with crude prices. Woodside Energy slipped 2.16 per cent, Santos 0.93 per cent and Beach Energy 1.48 per cent.
Bulk metal miners dragged as iron ore wallowed near seven-month lows. The most-traded ore contract on the Dalian Commodity Exchange was this morning down another 0.6 per cent after falling 5 per cent overnight.
BHP retreated 1.07 per cent. Rio Tinto shed 0.44 per cent. A 20-month low in copper helped pull South32 down 1.41 per cent.
ANZ eased 1.15 per cent after confirming it was in talks to acquire accounting software provider MYOB from US private equity firm Kohlberg Kravis Roberts. The bank said the two parties had yet to reach agreement and there was no certainty a deal would proceed.
Investment manager Platinum fell 1.71 per cent to a four-week low after reporting net outflows of $304 million last month. Funds under management declined to $18.2 billion.
Most Asian markets rebounded this morning as Covid cases in Shanghai held broadly steady. The Asia Dow rose 0.47 per cent. Hong Kong’s Hang Seng firmed 0.17 per cent. Japan’s Nikkei gained 0.33 per cent. China’s Shanghai Composite slipped 0.3 per cent.
US futures were little changed. S&P 500 futures improved one point or 0.03 per cent.
Gold inched up US$1.30 or 0.08 per cent to US$1,726.10 an ounce.
The dollar bounced 0.28 per cent to 67.64 US cents.