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The share market pared sharp initial losses after wages increased less than expected last quarter, easing pressure on the Reserve Bank to hike interest rates to crush inflation.
The S&P/ASX 200 trimmed a 69-point fall to 16 points or 0.22 per cent by mid-session.
Strong trading updates from Santos, Woolworths and Westfield landlord Scentre Group helped offset misses from Domino’s Pizza, EML Payments and Coronado.
What’s driving the market
Bad news for employees was greeted as good news for employers as wage growth fell short of expectations. The Wage Price Index grew 0.8 per cent in the December quarter, versus expectations for an increase of 1 per cent. Annual growth of 3.3 per cent was below the RBA’s forecast for an increase of 3.5 per cent.
“The increase in hourly wage rates for the December 2022 quarter was lower than the increase for the September quarter (0.8 per cent compared to 1.1 per cent). It was, however, higher than any December quarter increase across the last decade,” Michelle Marquardt, ABS head of prices statistics, said.
With wages a major driver of inflation, financial markets interpreted the miss as reducing pressure on the RBA to keep hiking rates. The dollar dropped around a fifth of a cent before recovering to 68.49 cents.
Bond yields pared strong early advances. The Australian ten-year yield backed down to 3.87 per cent from a seven-week high of 3.973 per cent.
“Both the quarterly and annual read were below market expectations and, whilst it is clearly too soon to get excited over ‘peak wages’, momentum is slowing so perhaps we are near,” Matt Simpson, senior market analyst at City Index, said.
“Ultimately I suspect the RBA remain on track for a 25bp hike in March and May, but the data is not weak enough to call for a pause.”
The ASX 200 fell to a fresh five-week low in the first hour of trade following Wall Street’s worst session since mid-December. The rate-sensitive Nasdaq dropped 2.5 per cent after an increase in business activity stoked rate-hike worries. The S&P 500 and Dow both lost around 2 per cent.
“Wall Street indices losing over 2% in a single session after a long weekend is perhaps a sign that investors have started to realise that January month bets were a little too over-optimistic,” Kunal Sawhney, CEO of research group Kalkine, said.
Going up
Origin Energy bounced 12.91 per cent to $7.92 after its North American suitors firmed up a takeover proposal following due diligence. A consortium including Brookfield Asset Management and MidOcean Energy presented a revised conditional proposal to acquire Origin at $8.90 per share for holdings up to 100,000 shares.
The revised price is a discount to the initial of $9, but a significant premium to yesterday’s closing price of $7.01. The share price had retreated amid growing fears of a hefty cut to the offer price. Origin said the revised offer “had the potential to deliver significant value to shareholders”.
Santos shareholders welcomed a record full-year profit following the acquisition of Oil Search by lifting the stock price 4.19 per cent. The energy giant’s underlying profit jumped 160 per cent to US$2.461 billion, aided by advances in oil and gas prices. The balance sheet was boosted by US$122 million in merger integration synergies.
A 20.6 per cent increase in full-year funds from operations lifted Westfield shopping centre landlord Scentre Group 2.6 per cent. Occupancy at the firm’s 42 Westfield malls climbed to 98.9 per cent from 98.7 per cent in 2021.
WiseTech gained 4.12 per cent after reporting a 32 per cent first-half revenue increase. Earnings improved 36 per cent.
Woolworths climbed 1.85 per cent to a six-month high after a strong start to the year. Supermarket food sales increased 6.5 per cent through the first seven weeks. Big W saw sales rise 9.7 per cent. The supermarket group reported a first-half profit of $907 million, a 14 per cent increase from 1H22.
Among other companies reporting this morning, Silver Lake Resources tacked on 0.23 per cent, Qualitas 0.72 per cent, AUB Group 0.42 per cent and SiteMinder 5.19 per cent. Worley was unchanged.
Going down
Domino’s Pizza was dragged to the dumpster after a 4 per cent decline in first-half sales. Underlying net profit declined 21.57 per cent as earnings fell 21.3 per cent. Shares in the fast-food chance were smashed down 22.18 per cent.
News Corp skidded 7.96 per cent after negotiations to sell its Move digital real estate services business to CoStar Group fell over. The media group said discussions had ended.
EML Payments sagged 9.38 per cent after one-off impairments of $121.3 million contributed to a half-year loss of $129.9 million. Underlying earnings wilted 50 per cent.
Coal miner Coronado shed 5.4 per cent after a weather-affected decline in full-year production took some of the shine off record revenues and earnings. Adverse weather in Queensland clipped 7.2 per cent off production volumes. The miner expects output to recover this year.
Other drags among companies reporting included Flight Centre -1.45 per cent, OZ Minerals -0.05 per cent, Lovisa -0.91 per cent, St Barbara -9.38 per cent, Australian Ethical -0.73 per cent, Reece Group -3.32 per cent and Spark New Zealand -6.72 per cent.
Other markets
Asian markets tracked falls on Wall Street. The Asia Dow shed 0.84 per cent, China’s Shanghai Composite 0.44 per cent, Hong Kong’s Hang Seng 0.08 per cent and Japan’s Nikkei 1.27 per cent.
S&P 500 futures rebounded 7.5 points or 0.19 per cent.
Oil added to last night’s 1.2 per cent decline. Brent crude eased 14 US cents or 0.17 per cent to US$82.63 a barrel.
Gold bounced US$4.90 or 0.27 per cent to US$1,847.40 an ounce.
