ASX treads water as miners, energy stocks fall; CBA rally continues

Welcome to your five-minute recap of the trading day.

The numbers

The Australian sharemarket was treading water in Wednesday’s session as investors were weighing developments in the Middle East and a report showed local inflation fell to the lowest in almost four years, bolstering the case for further interest rate cuts.

The S&P/ASX 200 inched up just 3.7 points to 8559.2 points, with four of its 11 sectors in the green. Energy stocks continued to fall and miners slumped, while financial stocks gained. The Aussie dollar edged up 0.1 per cent to US64.98¢ as of 4.35pm AEST.

CBA shares closed at a fresh all-time high of $191.40, giving the bank a market value of $320 billion, and Virgin Australia shares lifted 3.4 per cent on their second day of trading on the ASX.

Stocks around the world rallied after the announcement of the ceasefire, but a more cautious tone has set in.Credit: Bloomberg

The lifters

Financial stocks had another strong session, with the big four big banks all finishing in the green. Commonwealth Bank – Australia’s biggest lender and the biggest stock on the ASX – climbed another 1.7 per cent, taking its rally since the start of the year to almost 25 per cent. NAB rose 0.8 per cent, Westpac lifted 0.7 per cent and ANZ gained 1.8 per cent.

Virgin Australia shares rose 3.4 per cent on the airline’s second day of trading, taking its share price to $3.34, up more than 15 per cent from its IPO price. The stock had jumped more than 11 per cent during its ASX comeback on Tuesday. Larger rival Qantas Airways added 0.8 per cent.

Star Entertainment shares jumped 8 per cent after shareholders approved a $300 million deal to hand control of the troubled casino operator to a consortium that includes pubs and pokies billionaire Bruce Mathieson. Mathieson’s interests will control up to 23 per cent of Star when convertible notes are exercised, while US-based Bally’s will emerge as its largest investor with a 38 per cent stake.

At a meeting to approve the deal, Star’s chair, Anne Ward, warned that the company faced collapse if the deal wasn’t approved. Its fate still hangs on a pending court judgement on a penalty for breach of money laundering controls that could exceed $400 million.

The losers

Mining stocks posted the biggest falls. Iron ore heavyweights BHP, Fortescue and Rio Tinto shed 1 per cent, 2.3 per cent and 0.6 per cent, respectively, after iron ore prices dropped 1.1 per cent overnight.

Gold miners Northern Star Resources, Evolution Mining and Newmont lost 2.6 per cent, 0.9 per cent and 1.1 per cent as the flight to haven assets such as bullion slowed.

Energy stocks continued to soften after oil prices suffered their biggest slump in three years over the past two days, due to the war in the Middle East. Oil and gas giant Woodside was down a further 0.7 per cent after its 6.5 per cent slump on Tuesday, while smaller rival Santos shed 1.2 per cent, even as oil prices edged higher in the afternoon as traders assessed the Iran-Israel ceasefire.

Brent Crude rose about 1 per cent to near $US68 a barrel, having slid 13 per cent in this week’s turmoil.

Supermarket chains Woolworths and Coles declined 0.7 per cent and 0.5 per cent, respectively, after a report in The Australian Financial Review suggested German discount rival Aldi is lowering prices, stepping up the supermarket wars.

Software maker Xero had its shares halted from trade until Thursday as it is selling $1.85 billion worth of new shares to fund managers to help pay for its $3.9 billion takeover of US accounting and payments software company Melio. This is the biggest acquisition in Xero’s history. The company is offering the new shares at $176 apiece, a 9.4 per cent discount on its last closing price.

The lowdown

The lukewarm session, in which the market swung between minor gains and losses, comes despite a boost in US stocks overnight after US President Donald Trump announced a ceasefire between Iran and Israel on Tuesday, raising hopes that the worst of the Middle East conflict has passed.

Share price movements were less pronounced than during the initial exuberance after the announcement, which had sent the ASX up 1 per cent on Tuesday, as investors were waiting to see if the fragile truce will hold.

“The geopolitical risks have abated, but the ceasefire doesn’t exactly look to be ironclad at this stage,” said Tim Waterer, chief market analyst at KCM Trade.

The ASX kept fluctuating even after the news that Australia’s monthly inflation rate cooled faster than anticipated in May, giving the Reserve Bank space to cut rates at its early July meeting. The Consumer Price Index indicator advanced 2.1 per cent, compared with economists’ 2.3 per cent forecast, Australian Bureau of Statistics data showed.

Phil O’Donaghoe, Deutsche Bank’s chief economist for Australia, said the lender was now expecting the Reserve Bank to cut rates by 25 basis points at its meeting on July 8, with further cuts expected for August and November.

Despite all the global uncertainty, there was “still nothing [that] appears pressing enough [from Australia’s perspective at least] to overwhelm the compelling domestic case for easier policy,” he wrote in a note to clients.

On Wall Street overnight, the S&P 500 climbed 1.1 per cent, following up on big gains for stocks across Europe and Asia, after Trump said Israel and Iran had agreed to a “complete and total ceasefire”. The main measure of Wall Street’s health is now back within 0.8 per cent of its record set in February. The Dow Jones jumped 1.2 per cent, and the Nasdaq rallied 1.4 per cent.

Investors viewed this week’s fall in oil prices as taking some pressure off inflation in the world’s largest economy, which in turn could give the Federal Reserve leeway to resume cutting interest rates.

The Fed has said it wants to wait and see how much Trump’s tariffs will hurt the US economy and raise inflation before committing to its next move. Trump has been pushing loudly for more cuts. Fed Chair Jerome Powell remains cautious, though he did indicate overnight that the Fed’s next move is likely to be a cut.

He told a Congressional committee that “We will get to a place where we cut rates, sooner rather than later – but I wouldn’t want to point to a particular meeting.″⁣

With AP, Bloomberg

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