Banks weigh down flat ASX; Transurban to cut 300 jobs

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

The numbers

Large rises in industrials, utilities and information technology were able to lift a sluggish market slightly higher, despite expectations of a weak day of trade following mixed activity on Wall Street.

Fed chair Jerome Powell soothed investors.Credit: Bloomberg

The S&P/ASX 200 closed 13.4 points, or 0.2 per cent, higher, reaching 8191.7, with eight of the 11 sectors rising. The Australian dollar was trading at US64.83¢ after closing, slightly down from yesterday.

The lifters

The strongest sectors on Thursday rose well over 1 per cent, with utilities (up 1.8 per cent), industrials (up 1.7 per cent) and information technology (up 1.3 per cent) carrying the day’s trading.

Utilities growth was powered by a 1.7 per cent jump at Origin, a 1.9 per cent lift at APA Group, and 2 per cent at AGL.

The strongest performing individual stocks of the day were explosives firm Orica (up 7.4 per cent), embattled software developer WiseTech (up 3.8 per cent), and Ramsay Health Care (up 3.8 per cent).

The laggards

The weakest sectors of the day were financials (down 0.6 per cent), consumer discretionary (down 0.3 per cent), and healthcare (down 0.1 per cent).

The only major bank in positive territory was NAB (up 1.4 per cent). Its competitors CBA (down 0.3 per cent), Westpac (down 1.2 per cent), and ANZ (down 1.9 per cent), all struggled throughout the day.

Meridian Energy and Mercury New Zealand were two of the worst performers, after being two of the strongest yesterday. They were down 3.3 per cent and 2.9 per cent respectively at close of trading.

Woodside closed 0.8 per cent down, with Santos and BHP closing flat. Rio Tinto rose by 0.1 per cent.

The lowdown

The Australian market rebounded after falling at the open after US President Donald Trump teased a trade deal to be announced at a White House press conference at midnight AEST.

While the first trade deal – or more likely a tariff reduction – would be important, the outcome of US-China negotiations this weekend in Switzerland were even more crucial, Moomoo market strategist Jessica Amir said.

“I think that that will put fire under the belly of commodities,” she said. “I do believe that the bull scenario could gain firepower if there is any reduction of tariffs on either side of the US or China.”

US earnings, outlooks and macroeconomic data had all been stronger than expected, she said, and recently downtrodden energy and materials sectors could catch a bid when more trade deals were brokered and market sentiment improved.

Analysts from NAB’s US economics team said the ongoing trade policy uncertainty would weigh on activity.

“While financial markets have recovered some ground in recent weeks on the back of more positive trade developments, it is still very unclear where tariffs will ultimately settle, which may cause investment decisions to be deferred,” they said.

IG market analyst Tony Sycamore said he expected “the ASX 200 to spend some time [months] rotating around the 200-day moving average [currently at 8147], albeit with a good dose of the usual volatility viewed in May thrown into the mix”.

ANZ reported cash profits of $3.6 billion, flat on the same period a year earlier, in the last results for outgoing chief executive Shayne Elliott before he is replaced by Nuno Matos. Compared with the September half, cash profits bounced by 12 per cent.

Elliott said the bank made record revenue in the half year, as Suncorp bank’s earnings were included in ANZ’s, and it had growth in home loans at 3 per cent during the period. Charges for impaired loans fell sharply compared with the September half, from $336 million to $145 million.

The bank will pay a dividend of 83¢, also flat compared with the first half of last year. The dividend will be franked at 70 per cent.

Toll roads giant Transurban has announced it will cut 300 jobs after a review of its business. Transurban operates nearly all Australia’s 21 toll roads, including Melbourne’s CityLink and Sydney’s WestConnex. Transurban shares were 1.7 per cent higher.

The S&P 500 rose 0.4 per cent. The index is coming off a two-day losing streak that had snapped its nine-day winning run. The Dow Jones rose 0.7 per cent, and the Nasdaq composite added 0.3 per cent. US Federal Reserve chair Jerome Powell said the central bank had time to wait before making any potential moves on rates, but he warned that sustained tariffs could both weaken the economy and trigger higher inflation.

On Wall Street, indexes had been modestly higher earlier in the morning, with the Dow briefly up 400 points, on hopes that the US and China may be making the first moves towards a possible trade deal that could protect the global economy. The world’s two largest economies have been placing ever-increasing tariffs on each other’s products in an escalating trade war, and the fear is that they could cause a recession unless trade can move more freely.

The announcement for high-level talks between US and Chinese officials this weekend in Switzerland helped raise optimism, but some of that washed away after Trump said he would not reduce his 145 per cent tariffs on Chinese goods as a condition for negotiations. China has made the de-escalation of the tariffs a requirement for talks.

Such on-and-off uncertainty surrounding tariffs has helped create sharp swings within the US economy, including a rush on imports earlier this year to beat possible tariffs. Underneath those swings, as well as surveys showing US households are growing much more pessimistic about the future, the Fed said it continued to see the economy running “at a solid pace” at the moment.

Powell said that gave the bank time to wait before making any potential moves on interest rates, even if Trump has been lobbying for quicker cuts to “juice up” the economy.

Tweet of the day

Quote of the day

‘Any actual trade deal between the US and China could take months, if not years, to thrash out, and it is unlikely that, during the remainder of Trump’s term, they will be reduced to anything close to the average of about 20 per cent rate they were before Trump began ratcheting them up this year.’

That’s columnist Stephen Bartholomeusz on the announcement of high-level trade talks between the US and China, and their respective central banks’ responses to the new economic landscape.

With AP, Bloomberg

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