ASX falls following jobs surprise; Downer EDI, Ventia slump

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

The numbers

The Australian sharemarket closed lower on Thursday after it swung into the red following the release of stronger-than-expected employment data, which put a dampener on investors’ rate cut hopes, wiping out the market’s early gains.

Having opened higher, the S&P/ASX 200 ended the session down 23.3 points, or 0.3 per cent, at 8330.3 points, with nine of the bourse’s 11 industry sectors closing in the red. The Australian dollar made gains following the ABS announcement, and was trading at US64.13¢ as at 4.13pm AEDT.

Wall Street’s benchmark index broke its losing streak. Credit: AP

The lifters

Despite the wider market decline, technology stocks largely held on to their morning gains following a strong session from their peers on Wall Street. WiseTech Global, the largest tech stock on the local market, rose 0.7 per cent and Xero rose by 1.4 per cent. Block, the parent company of Afterpay, held its place as the session’s best-performing large cap stock, jumping 4.4 per cent.

Pilbara Minerals’ shares rose 4 per cent following news that chief executive Dale Henderson bought 500,000 shares earlier this week, according to a director’s interest notice published on Thursday.

The laggards

Hopes for an interest rate cut early next year were dashed after data from the Australian Bureau of Statistics (ABS) showed the country’s unemployment rate fell from 4.1 per cent to 3.9 per cent in November, with 36,000 new jobs created across the country.

BetaShares chief economist David Bassanese said the “blockbuster” employment report indicated that the prospect of an official interest rate cut as early as February would likely be pushed back yet again.

While the economy grew just 0.3 per cent in the September quarter and 0.8 per cent over the year, Australia’s employment growth was stronger than expected, he noted.

Industrials and the interest-rate property stocks led declines, with TCL, Brambles, and SGH all trading lower.

Mining giant BHP suffered a similar fate, sliding 0.5 per cent, while Rio Tinto and Fortescue were able to rebound before close, finishing up 0.6 per cent, and 0.3 per cent, respectively.

Warehouse and logistics real estate investment trust Goodman Group shed 1 per cent, while shopping centre owners Scentre and Vicinity Group fell by 2 per cent and 1 per cent, respectively. Diversified property group Mirvac lost 2.9 per cent.

Engineering and construction firm Downer EDI slumped 6 per cent after the competition watchdog said it started civil cartel proceedings in the Federal Court against Downer’s subsidiary Spotless Facility Services and Ventia Services’ subsidiary Ventia Australia over alleged price fixing relating to maintenance and operation services for the Department of Defence. Ventia dived 22.7 per cent.

The lowdown

With the prospect of a February rate cut all but gone, Bassanese said he believes the RBA will hold fire on rates at least until May – which would likely be after the next federal election.

“The bottom line is that the December quarter [inflation] report in late January will now need to be very low for the RBA to consider a rate cut as early as February,” he said.

“If the CPI report shows trimmed mean annual inflation still around 3.5 per cent, a rate cut would be off the cards. We’d likely need to see a decline in annual trimmed mean inflation to perhaps 3 per cent or less, which seems unlikely.”

Overnight in the US, investors took heart from America’s inflation figures and sent the S&P 500 up 0.8 per cent to break its first two-day losing streak in nearly a month and finish just short of its all-time high. Big Tech stocks drove the Nasdaq composite up 1.8 per cent to top the 20,000 level for the first time. The Dow Jones, meanwhile, lagged the market with a dip of 99 points, or 0.2 per cent.

Stocks got a boost as expectations built that the US inflation data from Wednesday will allow the Fed to deliver another rate cut at its meeting next week.

Traders are betting on a nearly 99 per cent probability of that, according to data from CME Group, up from 89 per cent a day before. If they’re correct, it would be a third straight cut by the Fed after it began lowering rates in September from a two-decade high. It’s hoping to support a slowing job market after getting inflation nearly all the way down to its 2 per cent target.

Lower rates would give a boost to the economy and to prices for investments, but they could also provide more fuel for inflation.

Expectations for a series of cuts to rates by the Fed have been one of the main reasons the S&P 500 has set an all-time high 57 times this year, with the latest coming last week.

The biggest boosts for the index on Wednesday came from Nvidia and other Big Tech stocks. Their massive growth has made them Wall Street’s biggest stars for years, though other kinds of stocks have recently been catching up somewhat amid hopes for the broader US economy.

Tesla jumped 5.9 per cent to finish above $US420 at $US424.77. It’s a level that Elon Musk made famous in a 2018 tweet when he said he had secured funding to take Tesla private at $US420 per share.

GE Vernova rallied 5 per cent for one of the biggest gains in the S&P 500. The energy company that spun out of General Electric said it would pay a 25¢ dividend every three months, and it approved a plan to send up to another $US6 billion to its shareholders by buying back its own stock.

Tweet of the day

Quote of the day

“We allege this conduct caused direct harm to the Commonwealth and ultimately Australian taxpayers.”

That’s ACCC chair Gina Cass-Gottlieb in a statement released on Thursday announcing that the watchdog has taken Federal Court action against ASX-listed companies Ventia and Downer, accusing the companies of causing “direct harm” to the Australian government and taxpayers by allegedly engaging in a price-fixing cartel for multibillion-dollar defence contracts.

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With AP

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