Energy, banking stocks end ASX’s seven-day streak

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

The numbers

Energy and banking stocks dragged the Australian sharemarket into the red on Monday, breaking its seven-day streak, despite a buoyant Wall Street which rose on Friday amid hopes of a rollback of Trump’s Liberation Day tariffs.

The S&P/ASX 200 closed 80.2 points, or 1 per cent lower, to 8157.8 in the first trading session since Labor’s landslide election win on Saturday. All 11 sectors closed in the red.

Wall Street’s benchmark index has had nine straight winning sessions.Credit: Bloomberg

The lifters

Gold Road Resources led the bourse with gains of 9.4 per cent after the miner said yes to a sweetened $3.7 billion takeover offer from South African rival Gold Fields. Afterpay owner Block (formerly Square) rose 5.1 per cent, partially offsetting the steep loss of 26.7 per cent suffered last Friday. Diagnostics imaging provider Healius finished 4 per cent higher after it rewarded shareholders with a special dividend of 41.3¢ a share.

The laggards

Hotels-focused tech platform SiteMinder was the bourse’s biggest loser, shedding 8.6 per cent. Nuix lost 7.1 per cent and Clarity Pharmaceuticals declined 6.9 per cent.

Westpac shares fell 3 per cent after half-year profits dipped 1 per cent to $3.3 billion. The bank’s margins were squeezed by competition in the mortgage market, while it reported fewer customers were struggling to meet their repayments.

The bank will pay an interim dividend of 76¢ a share, the same as the second-half dividend. Net interest income had fallen 2 per cent in the half, and its net interest margin – the cost of funding compared with what it charges for loans – was 2 basis points lower at 1.92 per cent. The result is slightly weaker than analysts had expected.

Meanwhile, big four rivals NAB (down 1.8 per cent), CBA (down 1.6 per cent) and ANZ (down 1 per cent) are also in the red.

The big banks will be in focus this week as NAB and ANZ reveal their half-year results later this week. CBA will release a trading update later this month.

Energy stocks lost ground after Organisation of the Petroleum Exporting Countries (OPEC) announced an increase in output, driving oil prices lower. The sector shed 2.9 per cent. Woodside lost 3.6 per cent while Santos shed 4 per cent.

Pub and drinks giant Endeavour Group’s share price closed flat after its quarterly trading update revealed a 1.7 per cent decline in group revenue, with strength in the pubs business unable to offset the decline in retail sales.

The lowdown

Now that Labor has won government for a second term and increased its majority, NAB economists are expecting the government’s share of economic activity will increase over the next three years.

“In the very near term, the change since markets closed on Friday is simply that the ALP’s position as the party of government is now more secure, and its ability to execute on its agenda will be easier. This provides financial markets with more certainty and predictability,” the NAB Economics team wrote in a market update note.

The government’s agenda is expected to proceed as it has in the first term; relatively cautiously and sticking to a “no surprises” policy, the economists wrote.

“This dynamic towards bigger government is consistent with the notion of regime change, where we have transitioned from a multi-decade economic and political regime based on free trade and free markets to one where the role of government is bigger and broader than was the case in the prior regime. The public sector debt burden will continue to rise.”

Given ongoing deflation and various risks to domestic growth, the NAB Economics team believes Australia’s Reserve Bank will see the need to move to a “more neutral stance relatively quickly”.

“If the RBA knew on 1 April what it knows today, it is likely that the Board would have decided to lower the cash rate by 25bp at the last meeting and followed up that easing up with a 25bp rate cut in May. There is thus some catch up required to align policy settings with recent developments.”

On Friday, Wall Street rose across the board to extend its winning streak. The rally was spurred by a better-than-expected report on the US job market and resurgent hope for a ratcheting down in the US trade showdown with China.

The S&P 500 climbed 1.5 per cent. The Dow Jones added 1.4 per cent, and the Nasdaq composite rose 1.5 per cent.

Roughly 90 per cent of stocks and every sector in the S&P 500 advanced. Technology stocks were among the companies doing the heaviest lifting. Microsoft rose 2.3 per cent and Nvidia rose 2.5 per cent. Apple, however, fell 3.7 per cent after the iPhone maker estimated that tariffs will cost it $US900 million ($1.39 billion).

Banks and other financial companies also made solid gains. JPMorgan Chase rose 2.3 per cent and Visa closed 1.5 per cent higher.

US employers added 177,000 jobs in April. That marks a slowdown in hiring from March, but it was solidly better than economists anticipated. However, the latest job figures don’t yet reflect the effects on the economy of president Donald Trump’s across-the-board tariffs against America’s trading partners. Many of the more severe tariffs that were supposed to go into effect in April were delayed by three months, with the notable exception of tariffs against China.

The S&P 500 slumped 9.1 per cent during the first week of April as Trump announced a major escalation of his trade war with more tariffs. The market has now clawed back its losses since then, helped by a string of resilient earnings reports from US companies, hopes for de-escalation of trade tensions with China and expectations that the Federal Reserve will still be able to cut rates a few times this year.

The benchmark index is still down 3.3 per cent so far this year, and 7.4 per cent below the record it reached in February.

Falling crude oil prices have weighed on the sector. Crude oil prices in the US are down about 17 per cent for the year. They fell below $US60 per barrel this week, which is a level at which many producers can no longer turn a profit.

Tweet of the day

Quote of the day

“I have no idea who the other person is that ran against him, and, you know, we [Albanese and I] have had a very good relationship.”

US President Donald Trump

That’s US President Donald Trump indicating he doesn’t know who Peter Dutton is after he was asked by this masthead about the outcome of the Australian federal election.

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with AP

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