ASX falls on US rate outlook; banks and tech shares drop
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket fell sharply on Monday as investors worried there might be fewer US interest rate cuts than previously hoped this year, due to ongoing concerns about inflation risks in the world’s largest economy.
The S&P/ASX200 fell 102.2 points or 1.2 per cent, to 8,191.90 points. Nine out of 11 industry sectors traded in the red, led by falls in technology, banks and consumer stocks.
The Australian dollar rose, retreated and traded at US61.35¢ at 4.16pm AEDT. In a sign of the weakness in consumer spending, Myer and Premier both reported poor trading updates and suffered major share price falls. Myer shares plummeted 23.1 per cent and Premier dropped 15.9 per cent.
Myer has confirmed its sales shrank in the second half of 2024.Credit:Credit: Eamon Gallagher
The lifters
Shares in wealth business Insignia rose 2.4 per cent amid a bidding war between global investment companies. The company announced on Monday morning it had received a revised non-binding indicative proposal from Bain Capital to acquire its shares for $4.30, matching CC Capital’s earlier bid.
Shares in embattled casino operator Star Entertainment rose after last week’s collapse, lifting 13.6 per cent to 12¢. The stock increased as the company disclosed Xingchun Wang, who has a registered address in Macau, China, had become a substantial shareholder in the ailing business, with a 5.52 per cent stake.
Last week, a Morningstar analyst predicted Star had a 50 per cent chance of falling into administration, as the gambling company struggles amid a grim cash crunch and plummeting investor confidence
Energy was one of the few sectors in green on Monday. Heavyweights Woodside Energy, Santos and Ampol were up 2 per cent, 2.1 per cent and 0.2 per cent respectively. Utilities were also on the rise, spurred by gains in Origin Energy (up 1 per cent) and Meridian Energy (up 1.5 per cent).
The laggards
The retail sector was one of the biggest losers on Monday. Shares in Myer plummeted after the retail juggernaut announced sales had shrunk in the second half of 2024, a period which covers the key Christmas and Black Friday trading period.
In the 22 weeks to the end of December, Myer’s total sales were about $1.59 billion, down 0.8 per cent on the same period the previous year. Executive chair Olivia Wirth said the year-to-date sales performance was “stable” despite the challenging trading conditions.
“Trading during last year’s key sales events including Black Friday was strong, but consumers remain cautious and focused on value given persistent cost-of-living pressures,” she said.
The update was released in concert with half-year results from Premier Investments, chaired by billionaire retail veteran Solomon Lew, who is also Myer’s biggest shareholder.
The big banks all fell. CBA lost 2.1 per cent, Westpac dropped 2.2 per cent, ANZ lost 1.3 per cent and NAB fell 1.9 per cent. Technology shares fell sharply. WiseTech was down 3.6 per cent, Xero was down 2.8 per cent and NextDC fell 4 per cent.
Shopping centre owners Stockland and Vicinity were down 2.3 per cent and 1.4 per cent. Goodman Group also took a hit, falling 2.1 per cent.
The lowdown
Given the current strength of the US market and the recent jump in US jobs data, ATFX Australia chief market analyst Nick Twidale said the odds of rate cuts from the Federal Reserve had decreased.
On Wall Street last Friday, US stocks fell on worries that good news on the job market might be too good and might prove to be bad for Wall Street by keeping inflation and interest rates high. The S&P 500 tumbled 1.5 per cent to close its fourth losing week in the past five.
Closer to home, traders are similarly concerned. Thursday marks the release of the ABS’s monthly employment data amid signs the labour market has not been easing as quickly as expected.
A strong jobs market could keep the Reserve Bank of Australia cautious about cutting interest rates, even as underlying inflation takes a convincing step down. Investors welcome low interest rates as they’re viewed as a catalyst for growth.
Such strength in hiring is good news for workers looking for jobs. But it could also keep upward pressure on inflation by keeping the overall economy humming.
In the US, the Fed has already indicated it’s likely to ease rates fewer times this year than expected because of worries about higher inflation. That’s partly because some officials are taking the possibility of tariffs seriously and other policies coming from President-elect Donald Trump that could worsen inflation.
Tweet of the day
Quote of the day
“You can’t stay the same; people expect you to change and evolve,” Hungry Jacks chief executive Chris Green said.
The 53-year-old Australian burger chain is known as the local rival to global juggernaut McDonald’s, which has twice as many stores (over 1000) as Hungry Jack’s (460). Cost-of-living pressures have hit middle-of-the-road restaurants particularly hard, pushing customers towards cheaper alternatives of casual dining and fast food.
Read more of Jessica Yun’s piece here.
You might have missed
On Monday, The Sydney Morning Herald launched a special series, Saving Sydney, to float bold ideas to solve the worsening housing situation facing our city.
It is authored by the Herald’s Generation Z trainee reporters, who convened a panel of experts in their own age group to listen to their ideas, no matter how big and bold, to address the crisis that affects their generation the most.
Read more here.
With AP
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