ASX Update: Tired market retreats as banks weigh

The share market reversed into a new fiscal year with declines accelerating following an uptick in Covid-19 cases in NSW.

The S&P/ASX 200 faded to a mid-session loss of 11 points or 0.15 per cent. The sell-off briefly gathered steam after NSW reported 24 new locally-acquired cases, many of which were out in the community while infectious.

Newcrest, Fortescue Metals and Afterpay were the pick of the morning’s heavyweight movers. A profit warning dragged Lendlease to a 14-month low.

What’s driving the market

The market hit its session nadir after New South Wales Premier Gladys Berejiklian warned too many people were ignoring coronavirus symptoms.

“In too many examples we are seeing workers who are leaving the house with symptoms or going to work with symptoms,” she said. “Then inadvertently as they are going about shopping or other activity, they are passing it onto others.”

“If we want the lock down to succeed, all of us to have minimise our movements,” she added.

NSW health authorities reported 24 local cases, up from 22 the previous day. Queensland recorded two new local cases, Victoria and South Australia zero cases.

Investors could perhaps be forgiven a hangover following the best financial year in 34 years. The All Ords surged 26.4 per cent last fiscal year. The ASX 200 gained 24 per cent, the best result in the index’s 21-year history.

Tepid overnight leads contributed to a lack of urgency as a new year got underway. The S&P 500 keeps making new highs, but the extravagant advances of the early days of the pandemic rebound have dwindled. Last night, the index edged up 0.13 per cent to a fifth straight record close. The largest increase during the current run was 0.53 per cent.

Despite the slowdown, the head of global market strategy at Natixis Investment Managers, Etsy Dwek, believes the reflation trade has more to give.

“Along with reopening, we expect the cyclical rotation to continue, as reopening is not yet fully priced in. We therefore continue to favour sectors such as financials, energy, and materials,” she said.

“We want to ensure markets do not fall into complacency, especially given high valuations. But given high levels of cash on the sidelines, we do not believe investors are there yet,” she added.

The morning’s economic reports underlined the strength of this year’s rebound. Rival manufacturing gauges painted a healthy picture of factory activity last month. The AIG Manufacturing Index rose to 63.2 from 61.8 in May. The IHS Markit manufacturing PMI eased to 58.6 from 60.4. Readings above 50 indicate expanding activity.

“Australia’s manufacturing sector continued to expand at a strong pace despite some signs of disruption from the Victoria lockdown that lingered into June,” Markit economists noted. 

House prices climbed another 1.9 per cent last month, according to the CoreLogic Home Value Index. Prices across the nation’s capitals have jumped 13.5 per cent this year.   

A $2.44 billion increase in exports helped inflate the seasonally-adjusted trade balance to $9.68 billion in May. Imports increased $919 million. Iron ore exports hit a record $16.5 billion.

Going up

Gold stocks were among the morning’s best performers following an overnight rebound in precious metals. Regis Resources climbed 6.99 per cent, St Barbara 6.3 per cent and Newcrest 2.14 per cent.

Embattled data analytics firm Nuix bounced 6.56 per cent from yesterday’s record closing low. Other notable gains included EML Payments +5.46 per cent, Champion Iron +3.61 per cent and IGO +5.7 per cent.

Adbri hit a post-pandemic high, rising 2.02 per cent on news it was part of a joint venture that will acquire the Milbrae concrete and aggregate business. Milbrae operates 13 quarries and seven fixed concrete plants in the Riverina district.

Overnight strength in the US dollar helped companies with significant American operations. Transurban gained 0.7 per cent, CSL 0.28 per cent and Afterpay 1 per cent.

Fortescue Metals led a recovery in miners, rising 1.48 per cent. BHP edged up 0.04 per cent. Rio Tinto added 0.17 per cent.

Going down

Lendlease dived 9.5 per cent before regaining two-thirds after warning full-year profits would fall short of consensus. Delays relating to the UK’s struggles with the pandemic were expected to help cut operating profit to $375 – $410 million. The market had expected a figure nearer $460 million. The share price was last off 2.97 per cent at $11.14 after trading as low as $10.37.

Some of the heat came out of the “lockdown trade”. Supermarkets Woolworths and Coles – two of the prime movers over the last week – fell 0.97 and 0.76 per cent. Metcash lost 4.64 per cent as it traded without the right to a dividend. Most travel agents rebounded.

Banks were among the biggest drags. CBA shed 0.87 per cent, ANZ 0.43 per cent, NAB 0.25 per cent and Westpac 0.29 per cent.

REA Group eased 0.5 per cent after completing the acquisition of Mortgage Choice.

Other markets

US futures shrugged off a red morning on most Asian markets. S&P 500 futures firmed eight points or 0.18 per cent.

The Asia Dow dropped 0.26 per cent. Japan’s Nikkei dipped 0.43 per cent. China’s Shanghai Composite reversed to a rise of 0.07 per cent,

Oil continued to rally into tonight’s OPEC+ meeting. Brent crude climbed 24 cents or 0.32 per cent to US$74.86 a barrel.

Gold inched up $2.30 or 0.13 per cent to US$1,773.90 an ounce.

The dollar eased 0.11 per cent to 74.89 US cents.