By Jessica Yun
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket dipped into the red on Tuesday, dragged down by mining, tech and energy stocks, after the latest economic news out of China disappointed investors hoping for major new stimulus measures to be announced.
The S&P/ASX 200 closed 28.5 points lower, or 0.4 per cent, to 8,176.9, after opening in the green and losing ground throughout the afternoon. The local market had received a lukewarm lead from Wall Street, which slipped on Monday, following Treasury yields hitting their highest levels since the summer.
US stocks have largely been rallying to records on relief that interest rates are finally heading back down.Credit: Bloomberg
The lifters
The best performer of the day was West African Resources, which finished 7.5 per cent higher after it provided clarity to the market on the status of its Burkina Faso mining permits.
Credit Corp Group rose 3.7 per cent and Bellevue Gold ticked 2.7 per cent higher.
The big four banks, which had begun the day mostly lower closed higher, a possible indication that traders were once again selling one for the other.
ANZ, Westpac and National Australia Bank all rose 0.4 per cent, to $30.11, $30.91 and $37.27, respectively. The Commonwealth Bankwere advanced 0.2 per cent to $134.97.
The laggards
Miners were some of the biggest losers of the day as the iron ore price retreated on the back of the muted measures announced in China. Fortescue Metals sank 5.3 per cent, BHP finished 2.4 per cent lower and Rio Tinto dipped 0.2 per cent.
Lithium players IGO (down 5.5 per cent) and Liontown Resources down (5.1 per cent) also posted poor sessions. Champion Iron closed 4.4 per cent lower and Coronado Global Resources declined 4.3 per cent.
The tech sector also closed lower (down 1.1 per cent); Xero dipped 1.7 per cent and TechnologyOne fell 2.4 per cent.
The lowdown
The market had been basically flat around midday but dropped into the red after China’s state planners finally unveiled plans to bolster the world’s second-biggest economy in a highly anticipated press conference.
But the National Development and Reform Commission’s announcement didn’t include any new measures beyond those unveiled last Tuesday, and even made it clear that the 100 billion yuan ($A21 billion) support package unveiled last week would be deducted from next year’s budget.
“The market really expected more,” said Alicia Garcia-Herrero, chief economist for the Asia Pacific region at investment bank Natixis, told the BBC. “I would not have organised a press conference not to announce anything new.
Closer to home, the Reserve Bank unveiled minutes from its September 23-24 meeting, where it kept rates on hold at 4.35 per cent.
But NAB’s head of market economics, Tapas Strickland, said the minutes contained little new information on top of governor Michele Bullock’s press conference.
Meanwhile, AMP economist My Bui said the latest Westpac-Melbourne Institute’s consumer sentiment index was pointing to an uptick in consumer confidence.
“Recent progress in disinflation, prospects of no more rate hikes, coupled with plenty of fiscal support measures and a resilient labour market have all certainty helped push consumer confidence higher,” Bui wrote.
NAB’s business confidence and business condition surveys were also showing signs of improvement. “As consumers are feeling better, businesses are also more positive especially within retail, recreation and personal services firms,” she added.
“Overall today’s upbeat readings have been unsurprising, as household purchasing power improves from tax cuts and lower inflation amid a strong employment landscape.
“However, the major downside risk for household spending lies within a weakening labour market, with both consumers and businesses seeing slower jobs and wages growth and higher unemployment rate from here.”
US stocks have largely been rallying to records, relieved that interest rates are finally heading back down now the Federal Reserve has widened its focus to include keeping the economy humming instead of just fighting high inflation. Friday’s blowout report on US jobs growth raised optimism about the economy and hopes that the Fed can pull off a perfect landing for it.
The stronger-than-expected hiring figures pushed Goldman Sachs economist David Mericle to say he now sees just a 15 per cent chance of a recession, down from 20 per cent.
But Friday’s jobs report was so strong that it forced traders to ratchet back forecasts for how much the Fed will ultimately cut interest rates by. That in turn has sent Treasury yields higher, and the 10-year yield is back above 4 per cent for the first time since August.
The two-year Treasury yield also briefly climbed back above 4 per cent on Monday, up from just 3.50 per cent a couple of weeks ago. That’s a sizeable move for the bond market, and it can drag on prices for stocks and other investments.
When Treasury bonds, which are seen as the safest possible investments, pay more in interest, investors become less inclined to pay very high prices for stocks and other things that carry a higher risk of losing money.
In the bond market, the yield on the 10-year Treasury rose to 4.02 per cent from 3.97 per cent late Friday. The yield on the two-year Treasury, which more closely tracks expectations for the Fed, jumped more. It rose to 3.98 per cent from 3.92 per cent.
Treasury yields may also be feeling some upward push from the recent jump in oil prices. They’ve been spurting higher on worries that worsening tensions in the Middle East could ultimately lead to disruptions in the flow of crude.
Brent crude, the international standard, rose another 3.4 per cent Monday to $US80.73 per barrel. Benchmark US crude, meanwhile, gained 3.6 per cent to $US77.07 per barrel.
In stock markets abroad, European indexes were mixed following bigger gains in Asia.
Tweet of the day
Quote of the day
“It’s time for a rest, is what I think. I’ve done it for a very, very, very, very long time, and 70 years – is that long enough? That’s long enough, and I think that I’ll just call it a day and call it a day pretty soon, probably beginning of November.”
That’s talkback radio veteran John Laws telling his listeners on Tuesday about his retirement for the second time, following a 13-year stint at radio network 2SM.
You may have missed
Tickets are (metaphorically speaking) on sale for corporate Australia’s version of the footy finals, as the annual general meeting season kicks off and shareholders get ready to quiz boards on everything from a company’s carbon footprint to executive pay – both of which many would say remain too high.
And this year’s prize for extreme shareholder activism must go to the team of environmentalists incensed by Woolworth’s role in the near extinction of the Maugean skate fish from its last-known habitat of Tasmania’s Macquarie Harbour. Read Elizabeth Knight’s column here.
with AAP, AP
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