Fresh rate cut fears send sharemarket lower

Booking a four-day losing streak, the sharemarket fell to close out the week after investors were rattled by hotter-than-expected services and manufacturing data.

Australian shares fell sharply to finish the week, rattled by a sell-off on Wall Street as investors’ worries over inflation were rekindled when fresh data showed the US economy was picking up speed.

At the closing bell, the S&P/ASX200 shed 1.1 per cent, or 84.2 points, to reach 7727.6, with all 13 industry sectors finishing in the red. Across the week, the benchmark index finished 1.1 per cent lower having come within 33 points of its record during Monday’s session.

Meanwhile, the broader All Ordinaries also fell one per cent in Friday’s trading to 7999.2.

The Australian dollar was lower, buying US66.01c at 4.30pm.

While recent inflation data has kept hopes alive that the Fed will move to cut interest rates this year, the latest S&P Global Flash U.S. Composite PMI — a measure of activity in the services and manufacturing sectors — rebounded in May to its highest level in two years.

Australian shares fell sharply to finish the week. Picture: NewsWire/ Gaye Gerard

Bond yields surged in the United States and locally on the robust reading.

The yield on the US 10-year Treasury note – a benchmark for mortgages and other loans – jumped five basis points to 4.5 per cent, while 10-year Australian bond yields added 6 basis points to 4.3 per cent.

Despite a stellar result from chipmaker Nvidia, which jumped 9.3 per cent to reach a market cap of $US2.6tr ($3.9tr), the US’ major indices declined for a second consecutive session.

The S&P500 declined 0.7 per cent, the Nasdaq lost 0.4 per cent, and the Dow shed 1.5 per cent – its worst intraday loss in more than a year.

AMP chief economist Shane Oliver said the ride for shares through the remainder of the year was likely to remain volatile and constrained.

“Valuations remain stretched, sentiment towards shares remains upbeat which is negative from a contrarian perspective, uncertainty remains regarding the outlook for interest rate cuts and geopolitical risks around the Israel-Iran conflict and US election are high,” Dr Oliver said.

“However, we continue to see further gains in shares this year as disinflation continues, central banks ultimately cut interest rates and recession is avoided or proves mild.”

On the local benchmark, consumer discretionary stocks were the worst performing, sinking 2.5 per cent, with sector heavyweight Wesfarmers off 3.8 per cent to $63.82.

Interest rate sensitive real estate and tech stocks also performed poorly, losing 1.6 per cent and 1.5 per cent, respectively.

Goodman Group sank 1.5 per cent to $33.67, Scentre was 1.6 per cent lower to $3.11, Xero slumped 2.7 per cent to $131.19 and NextDC lost 2.2 per cent to $17.59.

The big four banks weighed on the benchmark, led lower by CBA shares which shed 1.5 per cent of their value. Picture: Newswire

Financials also weighed on the benchmark, off 1.2 per cent. CBA traded 1.5 per cent lower to $118.87, NAB slipped 1.3 per cent to $33.96, Westpac slipped 1.2 per cent $26.56, and ANZ was off 1 per cent to $28.11

In commodity-related stocks, iron ore heavyweight miners traded lower even as futures for the key steelmaking ingredient on the Singapore Exchange rebounded back above $US120 per tonne.

BHP lost 0.6 per cent to $44.64, while Fortescue and Rio Tinto slipped 0.8 per cent to $26.77 and $132.50, respectively.

In a quiet day among individual stocks, shares in Appen jumped 2.5 per cent to 61c after the artificial intelligence provider reported the artificial intelligence services provider said it was expecting to break even on an operating basis in the current financial year.

Mayne Pharma Group advanced 1.3 per cent to $5.48 after the pharmaceutical company said a cyber attack on Change Healthcare, the largest clearinghouse for medical claims in the US, had “no material impact” on its business.

Originally published as Fresh rate cut fears send sharemarket lower