ASX dips as CBA retreats; miners get China boost

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

The numbers

The Australian sharemarket closed in the red on Friday as Commonwealth Bank shares retreated from historic highs and the technology sector lost ground, after a plunge in Tesla shares weighed on Wall Street amid an escalating feud between Donald Trump and Elon Musk.

The S&P/ASX200 dropped 23.2 points or 0.3 per cent to 8515.70, with nine of 11 industry sectors in negative territory. Technology and healthcare were the weakest sectors, both falling 0.7 per cent, while financials and consumer discretionary stocks also dropped. The Australian dollar was trading at US64.97¢ in the afternoon.

The decline in the ASX followed a 0.5 per cent slide on Wall Street overnight, with Tesla tumbling 14.3 per cent as Musk and Trump exchanged insults in public.

The ASX closed lower on Friday, as banking giant CBA retreated and technology stocks fell.Credit: Oscar Colman

The lifters

Mining giant BHP rose 0.7 and Fortescue gained 1 per cent amid tentative signs of progress in trade talks between the US and China, which is the biggest market for iron ore. However, fellow iron ore giant Rio Tinto did not share in the gains, and its shares closed 0.4 per cent lower.

On Friday night, the US president said that he had a “very good phone call” with Chinese President Xi Jinping as the two superpowers look to reach a trade deal. Oil giant Woodside added 1 per cent and Santos gained 0.6 per cent.

The laggards

Commonwealth Bank – the biggest stock on the market – fell 0.8 per cent, after its market value earlier this week hit the milestone figure of $300 billion. CBA, which hit a record intraday high of $182 per share on Thursday, accounts for about 12 per cent of the ASX, and its shares have jumped almost 17 per cent this year. Westpac lost 0.2 per cent and ANZ Bank fell 0.4 per cent, while National Australia Bank rose 0.2 per cent.

Technology shares were weaker, with logistics software group WiseTech falling 1 per cent, accounting software business Xero losing 0.7 per cent, and data centre owner NextDC losing 0.9 per cent.

Stocks tied to rare earths slumped on expectations the Xi-Trump trade talk progress could pave the way for China to ease export restrictions on the critical minerals. Pilbara Minerals fell 5.2 per cent and Lynas lost 1.2 per cent.

Gold stocks were lower, with Evolution Mining losing 2 per cent and Northern Star Resources shedding 0.3 per cent.

The lowdown

While investors were encouraged by the talks between China and the US, Craig Sidney, a senior investment adviser at Shaw and Partners, said a key focus for markets would be the US data on non-farm payrolls for May, to be released on Friday night. The expectation on Wall Street is for a slowdown in hiring from April.

The strength of the US labour market is a key consideration for the US Federal Reserve, which is expected to keep interest rates on hold at its meeting later this month.

“If it’s a big number there will be an expectation that rate cuts may be pushed back a bit further,” Sidney said.

Fed officials have said they are waiting for more data before lowering rates as they balance the risks of still-elevated inflation and a potential economic slowdown. Officials have said it could take months to gain clarity on the economic impacts of sweeping policy changes, particularly around trade.

Interest rate swaps showed that traders see about a 25 per cent probability of the Fed lowering the rates by July, after keeping them unchanged in a range between 4.25 per cent and 4.5 per cent at the June 17-18 meeting. The possibility of a reduction in September was around 90 per cent, and a total of two quarter-point rate cuts were fully priced in by year-end.

On Thursday, the S&P 500 fell 0.5 per cent for its first drop in four days. After sprinting through May and rallying within a couple of good days’ worth of gains of its all-time high, the index at the centre of many retirement accounts has lost momentum.

The heaviest weight on Wall Street was Tesla, which tumbled 14.3 per cent. It has lost nearly 30 per cent of its value so far this year as chief executive Elon Musk’s relationship with Trump sours amid a disagreement over the president’s signature bill of tax cuts and spending. The EV maker lost about $US150 billion ($230 billion) in value, sending it below the $US1 trillion benchmark.

A report on Thursday said more US workers applied for unemployment benefits last week than economists expected. New applications for jobless benefits rose by 8000 to 247,000 for the week ending May 31, according to the US Labour Department. The number remains relatively low compared with historical data but it still hit its highest level in eight months.

Hopes that Trump will lower his tariffs after reaching trade deals with other countries have been among the main reasons the S&P 500 has rallied back so furiously since dropping roughly 20 per cent from its record two months ago. It’s now back within 3.3 per cent of its all-time high.

With Bloomberg, AP, AAP

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