ASX retreats as Wall Street awaits inflation numbers; South32 slumps

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

The numbers

The Australian sharemarket declined for a second day, following Wall Street, where US stock indexes drifted lower in the runup to the latest update on inflation in the world’s largest economy.

The S&P/ASX 200 closed 39.4 points, or 0.5 per cent, lower at 8353.6 points, with real estate the only industry sector to make a significant move forward. The Australian dollar traded at US63.72¢ at 4.15pm AEDT, having lost close to 1 per cent overnight after a dovish shift from the Reserve Bank on Tuesday, which sparked rate cut hopes.

Wall Street drifted lower ahead of Wednesday’s latest inflation numbers.Credit: AP

The lifters

Growth in the real estate investment trust sector was buoyed by warehouse owner Goodman Group (up 1.7 per cent) and diversified property developer Stockland (up 2.2 per cent).

Consumer discretionary stocks were the only other industry that held up on Wednesday (up 0.1 per cent), spurred on by Kmart, Officeworks and Bunnings owners Wesfarmers (up 1 per cent). Online furniture retailer Temple & Webster added 2.5 per cent.

Pro Medicus recovered by 1.1 per cent after its 9 per cent slump in the previous session, bolstering the health care sector.

CSL slipped 0.9 per cent, while Sigma Healthcare finished flat following initial gains after saying it expects to hold a shareholder vote on its proposed $28.9 billion merger with Chemist Warehouse before year’s end, with management hoping to implement the deal in February.

The laggards

Mining stocks were led lower by South32, which slumped 4.4 per cent after announcing it would withdraw production guidance for its aluminium smelter in Mozambique following escalating civil unrest in the East African nation. Mineral Resources lost 1.6 per cent, while Fortescue (down 1.7 per cent) and Rio Tinto (down 1.2 per cent) were also weaker. BHP rose by 0.4 per cent.

Oil majors Woodside (down 0.8 per cent) and Santos (down 1.4 per cent) also retreated, having been among the biggest gainers on Tuesday.

All the big four banks declined, though the moves were small. Commonwealth Bank edged down 0.1 per cent, as did NAB, while Westpac shed 0.4 per cent and ANZ lost 1.3 per cent. Macquarie fell 0.8 per cent, while insurers QBE (down 2.7 per cent) and Suncorp (down 2.9 per cent) also retreated.

Yet no industry performed worse than the information technology sector (down 1.4 per cent), following a similarly difficult trading day on Tuesday. WiseTech shares lost 3 per cent, while Xero finished 1.4 per cent in the red.

The lowdown

BetaShares chief economist David Bassanese said the sharemarket was “hunkering down” ahead of the release of US inflation results, where a “firmish number” was expected. However, an inflation surprise could cause volatility on Wall Street and flow into the Australian market.

“If we get a high number, the immediate market reaction will be to question if the Fed can cut rates next week,” Bassanese said. “[The market] is vulnerable if they do get an upside surprise.”

On Wall Street overnight, stocks fell and bond yields rose ahead of the release of the inflation data on Wednesday US time.

The S&P 500 slipped 0.3 per cent, marking its first back-to-back losses in three weeks and further pushing away from its all-time highs. The Dow Jones and the Nasdaq also both fell 0.3 per cent.

Wednesday’s CPI will offer Fed officials a final look at the pricing environment before they meet next week. Any indication that inflation progress has stalled could well undercut the chances of a rate cut. For now, swap trading projects an 80 per cent chance of a quarter-point rate cut this month.

Tech giant Oracle sank 6.7 per cent after reporting growth for the latest quarter that fell just short of analysts’ expectations. It was one of the heaviest weights on the S&P 500, even though chief executive Safra Catz said the company saw record demand related to artificial intelligence technology for its cloud infrastructure business, which trains generative AI models.

AI has been a big source of growth that’s helped many companies’ stock prices skyrocket. Oracle’s stock had already leaped nearly 81 per cent for the year coming into Tuesday, which raised the bar of expectations for its profit report and future growth.

The Fed has been easing its main interest rate from a two-decade high since September to lift the slowing jobs market after bringing inflation nearly down to its 2 per cent target. Lower rates would help give support to the slowing job market, but they could also provide more fuel for inflation.

The yield on the 10-year Treasury rose to 4.24 per cent from 4.20 per cent late on Monday.

Indexes were mixed in China after the world’s second-largest economy said its exports rose less than expected in November. Stocks advanced 0.6 per cent in Shanghai, but fell 0.5 per cent in Hong Kong.

Tweet of the day

Quote of the day

“Telstra, as the emergency call provider, is at the centre of this critical public safety service. As such, it must have fail-safe systems and processes in place at all times. In this circumstance, its systems and contingency plans failed people in real need.”

Australian Communications and Media Authority member and consumer lead Samantha Yorke after Telstra was fined more than $3 million for failing to comply with emergency call rules during a technical disruption on March 1. The disruption resulted in 127 calls not being transferred to emergency services.

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with AP, Bloomberg

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