By Frances Howe
Welcome to your five-minute recap of the trading day.
The numbers
Gold stocks fell sharply and the Australian sharemarket closed lower on Wednesday, following the Reserve Bank’s surprise decision on Tuesday to hold interest rates steady, a move that caught many traders and economists off guard. Investors were also spooked by US President Donald Trump’s latest salvo in his unfolding tariff war.
The S&P/ASX 200 sank 52.10 points, or 0.6 per cent, to 8538.6, led by falls in the real estate sector, which was down 1.7 per cent. Only four of 11 sectors finished in the green.
The Australian dollar was higher against the US currency immediately after the Reserve Bank’s surprise decision to hold rates steady.Credit: Louie Douvis
The lifters
Energy shares lifted on Wednesday, led by Woodside (up 0.7 per cent) and Ampol (2.9 per cent higher). Santos closed flat. Of the big four banks, only Westpac closed higher at 0.7 per cent.
The utilities sector also lifted as Origin Energy gained 1.7 per cent and Meridian by 0.7 per cent. The sector performed the best out of the 11 on the index, gaining 1.1 per cent across the session.
The laggards
Miners dropped on Wednesday amid news that Trump will move to impose a 50 per cent tariff on copper, a metal in huge demand as the globe transitions to renewable energy. Despite seeing some lifts earlier in the day, resources giant BHP lost 1.0 per cent, Rio Tinto fell 0.6 per cent and Fortescue dipped 0.2 per cent.
Gold stocks fell off the edge of a pit, with Evolution Mining down sharply by 7 per cent, and rivals Newmont and Northern Star Resources falling 5.4 per cent and 3.4 per cent, respectively.
Of the remaining banks, the Commonwealth Bank fell 0.2 and ANZ sunk 0.5 per cent while NAB closed flat.
The lowdown
Gary Glover, senior investment adviser at Novus Capital said it was counterintuitively a positive sign that some of the Australian sharemarket’s largest stocks were starting to fall.
“The market really hasn’t sold off much from its highs, considering we’re seeing a lot of the leaders cool off,” Glover said, adding, “That’s a really good sign.”
“As the market gets more confident, it will start to see a bit more risk ... the index is not going to trade higher unless we start to see other sectors start to trade higher or other stocks start to pick up the slack.”
The Australian dollar, propelled higher against the US dollar immediately after the Reserve’s decision, was up 0.52 per cent to US65.25¢ at 5.45am AEDT. The S&P/ASX 200 closed on Tuesday 0.02 per cent lower at 8590.70.
Wall Street ended Tuesday on a mixed note after a broad sell-off the day before in response to the Trump administration setting new tariffs on more than a dozen nations.
The S&P 500 slipped 0.1 per cent. The Dow Jones Industrial Average fell 0.4 per cent, while the Nasdaq composite was little changed.
The sluggish trading came a day after the S&P 500 had its biggest drop since June as Trump announced a 25 per cent tax on imports from Japan and South Korea, and new tariff rates on other nations, scheduled to go into effect August 1. Nevertheless, the index is near the record it set last week.
Trump provided notice by posting letters on Truth Social that were addressed to the leaders of the various countries. The letters warned them to not retaliate by increasing their own import taxes, or else the Trump administration would further increase tariffs.
Just before hefty US tariffs on goods imported from nearly every country around the globe were to take effect in April, Trump postponed the levies for 90 days in the hope that foreign governments would be more willing to strike new trade deals. That 90-day negotiating period was set to expire before Wednesday.
With the tariffs set to kick in now on August 1, the latest move by the White House amounts to essentially a four-week extension of its previous 90-day pause, wrote Tobin Marcus, an analyst at Wolfe Research.
“At a very basic level, nothing actually happened based on Trump sending these letters, so there’s no reason to panic over headlines,” he wrote. “But we think these moves do contain some signal about where the trade war is heading, and that signal is mostly hawkish.”
During a cabinet meeting on Tuesday, Trump said he would be announcing tariffs on pharmaceutical drugs at a “very, very high rate, like 200 per cent”. He also said he would sign an executive order placing a 50 per cent tariff on copper imports, matching the rates charged on steel and aluminum.
President Donald Trump, during the cabinet meeting at the White House.Credit: Bloomberg
Shares in mining company Freeport-McMoRan were up 4.6 per cent following Trump’s remarks. The price of copper was up 8.7 per cent to $US5.47 ($8.38) per pound.
Chad Padowoitz is the chief investment officer at Talaria Capital and said pharmaceutical stocks globally had dipped less than some could have expected after Trump threatened the 200 per cent tariff on pharmaceutical imports.
“The tariffs news has been ebbing and flowing for a few months now, the market is discounting that somewhat …and I think you actually saw that in the pharmaceutical stocks in the US and Europe,” he said.
This latest phase in the trade war heightens the threat of potentially more severe tariffs that have been hanging over the global economy. Higher taxes on imported goods could hinder economic growth, if not increase recession risks.
Gains among healthcare and technology stocks helped outweigh a pullback in banks and other sectors.
Intel jumped 7.7 per cent and Eli Lilly and Co. was 1.1 per cent higher. JPMorgan was down 3.1 per cent and Bank of America fell 2.7 per cent.
Amazon shares fell 1.2 per cent as the online retail giant kicked off Prime Day, which, beginning this year, lasts four days. Amazon launched the membership sales event in 2015 and expanded it to two days in 2019.
With AP
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