A week that began with three straight advances continued to falter after a terror attack in Afghanistan pulled Wall Street lower.
The S&P/ASX 200 declined for a second day, easing seven points or 0.1 per cent by mid-session. At this morning’s low, the index came within four points of erasing the last of the 71 points it gained between Monday and Wednesday.
A downturn in sales at Wesfarmers pulled the retail giant down 2.5 per cent. Afterpay, Telstra and Woolworths weakened. Coles, CSL and Rio Tinto cushioned the market from a deeper loss.
What’s driving the market
US markets declined for the first time in six sessions as a deadly assault on Kabul airport compounded caution ahead of a speech tonight from Federal Reserve Chair Jerome Powell. At least 60 Afghans and 13 US military personnel were killed in the attack. The S&P 500 retreated 0.58 per cent from record levels
“The explosion in Afghanistan’s capital city of Kabul rattled market sentiment while adding to volatility and turning investors cautious,” Kalkine Group CEO Kunal Sawhney said.
Financial markets had already shown signs yesterday of switching to “risk-off” ahead of Powell’s speech. Investors fear another “taper tantrum” if the Fed chief outlines plans to reduce support for the economy.
“All eyes are now glued to the Fed Chair’s statements at Jackson Hole due tonight that could offer some guideposts for the pace and timing of the central bank’s plans to taper asset purchases,” Mr Sawhney said.
“Investors are expected to look for clues on how the central bank will exit from the measures it embraced to rescue the US economy from the virus crisis. Speculations are rife that the central bank may push forward its tapering plans, considering the risks of an economic slowdown from the fast-spreading Delta variant.”
Back home, a lockdown-fuelled downturn in sales over the last two months overshadowed a strong full-year result from Wesfarmers. The retail conglomerate reported a statutory net profit of $2.38 billion, up 40.2 per cent from FY20.
The company will pay a final dividend of 90 cents per share, as well as a capital return of $2 per share. However, the company warned sales had fallen by between 1.5 and 14.3 per cent at its Kmart, Target, Officeworks and Bunnings businesses over the first seven weeks of the new financial year.
“Bunnings’ trading performance in the 2022 financial year is expected to moderate following the extraordinary growth recorded in the 2021 financial year, which saw Australians and New Zealanders required to spend more time at home due to COVID-19 restrictions,” the company said.
Retail turnover across the country contracted a seasonally-adjusted 2.7 per cent last month, according to ABS data.
“Lockdowns and stay-at-home orders in many parts of Australia continued to impact retail trade in July, with many non-essential retail businesses closing their physical stores,” Ben James ABS Director of Quarterly Economy Wide Surveys, said.
“In particular, the first full month of lockdown in New South Wales, following the Delta outbreak in June, saw retail turnover in the state fall 8.9 per cent. This was the largest fall of any state and territory since August 2020.”
Biopharmaceutical Clinuvel was the morning’s big winner after surprising the market with record full-year revenue and profit. The share price surged 15.56 per cent to a two-year high after net profit more than doubled to $25.7 million.
Toll road operator Atlas Arteria climbed 5 per cent following yesterday’s well-received half-year result. Blackmores, another of yesterday’s reporters, rose 6.03 per cent to its highest since May 2019.
Defensive sectors outperformed. Healthcare, REITs and utilities rallied, along with industrials. At the heavyweight end of the market, Coles put on 2.27 per cent, CSL 1.08 per cent, Transurban 0.61 per cent and Newcrest 0.7 per cent.
Further down the food chain, Vicinity Centres added 2.11 per cent, Lendlease 1.49 per cent and Sonic Healthcare 1.35 per cent.
The big three bulk metals miners improved as the morning wore on. Rio Tinto gained 0.83 per cent, Fortescue 0.28 per cent and BHP 0.16 per cent.
Among companies reporting, Prime Media jumped 8.33 per cent, Avita Medical 6.43 per cent and Australian Finance Group 0.84 per cent. NextDC fell 3.97 per cent and Dusk Group 5.49 per cent. Resolute Mining was flat.
Yesterday’s best performer, Kuniko, tanked more than 25 per cent before reversing to a gain of 17.5 per cent. Shares in the Norway-focussed copper and battery metals explorer surged from a listing price of 20 cents to $3.60 yesterday, prompting a “Please Explain” from the ASX. The company said exploration activities had commenced at two of its projects.
Mayne Pharma fell 8.47 per cent after reporting an 18 per cent decline in full-year earnings to $66.1 million. The company said its US generic drug business had been impacted by competition, Covid and negative currency movements. Previously-announced impairments contributed to a net loss of $208.4 million.
Bega Cheese dipped 0.27 per cent despite more than tripling full-year profit to $72.2 million. The company more than doubled in size during the year by acquiring Lion Dairy and Drinks. Chinese demand for infant formula softened as the diagou channel dried up.
Lynas Rare Earths eased 2.7 per cent after CEO and Managing Director Amanda Lacaze warned Malaysia’s struggle to contain Covid-19 may “from time to time, affect our production outcomes”. The company reported a record full-year net profit of $157.1 million.
While Wesfarmers was the biggest drag at the pointy end of the market, Aristocrat Leisure fell 1.85 per cent, Afterpay 1.4 per cent and Goodman 0.46 per cent.
US futures rallied as most Asian markets advanced. The Asia Dow edged up 0.11 per cent. China’s Shanghai Composite rose 0.58 per cent and Hong Kong’s Hang Seng 0.83 per cent. Japan’s Nikkei dipped 0.33 per cent.
S&P 500 futures advanced 11 points or 0.25 per cent.
Oil clawed back almost half of last night’s loss. Brent crude rallied 56 US cents or 0.8 per cent to US$70.74 a barrel.
Gold rose US$4.40 or 0.25 per cent to US$1,799.60 an ounce.
The dollar edged up 0.05 per cent to 72.42 US cents.