ASX closes above 8600 for first time; CBA slips

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

The numbers

The local sharemarket has finished above 8600 for the first time ever after a stronger-than-expected US jobs report reaffirmed the strength of the world’s largest economy.

The benchmark S&P/ASX 200 index edged 7.2 points, or 0.1 per cent, higher to close at 8603 on Friday. Eight of the 11 sectors ended the day in the green. The broader All Ordinaries rose 8.3 points, or 0.1 per cent, to 8841.9.

Wall Street climbed to another record on Thursday. Credit: Reuters

The ASX 200 rose 1 per cent for the week, its best week since mid-May.

The Australian dollar was buying US65.74¢, from US65.69¢ cents at midday on Thursday.

The lifters

It was a good day for most sectors, with gains led by consumer staples ahead of expectations the Reserve Bank of Australia will announce another interest rate cut next week, foreshadowing more cash in consumers’ pockets. The sector gained 0.8 per cent on Friday as shares its two largest companies rose – Wesfarmers gaining 0.8 per cent and Aristocrat Leisure lifting 1.4 per cent.

Big supermarkets helped the sector’s strength, with Woolworths up 0.6 per cent and Coles rising 0.5 per cent.

Three of the big four banks, NAB, Westpac and ANZ all ticked higher, with rises of 0.6 per cent, 0.5 per cent and 0.8 per cent, respectively. Tech stocks also closed out the day 0.5 per cent higher, with logistics giant WiseTech recording a 1.1 per cent lift.

The laggards

The miners lost ground, with BHP sinking by 1.4 per cent and Rio Tinto dropping 1.3 per cent.

The Commonwealth Bank – the largest company on the bourse– edged down 0.9 per cent to $178, on track for its sixth day of declines out of the past seven sessions since Australia’s most valuable company hit an all-time-high of $192 on June 25.

The energy sector marginally lower, after a positive 1.3 per cent increase over the past five days and an 8.9 per cent lift across one month. Woodside gained 0.3 per cent but Santos sunk 0.3 per cent.

Childcare provider G8 Education slipped a further 3.5 per cent, to a two-year low of 96¢. Its shares have dropped 18.6 per cent since Tuesday, when Victoria Police announced a former G8 employee had been charged with sexual offences against children.

The company’s board is also under scrutiny, with the Australian Shareholders’ Association alleging that its limited experience in early childhood education and care raised questions about its capabilities to effectively oversee those responsibilities.

The lowdown

The retail sector performed well ahead of expectations of a Reserve Bank rate cut next week. Bell Direct analyst Grady Wulff said rate cuts presented growth opportunities for companies and may be a factor in the sector’s good performance on Friday.

“The retail sector did surprisingly well... When interest rates are cut, consumers have more discretionary money and more money to spend on retail,” she said, adding that the sector was rebounding after having depreciated for a while.

The futures market this week has been giving 97 per cent implied odds that the Reserve Bank will cut rates on Tuesday following more softer-than-expected economic data this week.

Tech also had a positive day on Friday, which Wulff said was linked to the amount being spent on artificial intelligence technologies.

“So a lot of people would question whether valuations had approached their peak in the sector, but the growth is still there. We’re seeing more money spent on AI more than ever,” she said. “So this drives tailwinds for our locally listed tech stocks, especially in the AI space or in tech in this area that has underperformed over the last few years.”

Investors are paying close attention to how US’s negotiations with trading partners will pan out amid the current pause on US President Donald Trump’s April tariffs, which he put on hold for 90 days to allow time for talks. Still, stocks have rallied in recent months to record highs as concerns that the levies will push the US into a recession have eased. On Thursday, the US jobs growth exceeded expectations and all but erased bets for a Fed July rate cut.

“There is still uncertainty out there, but one thing we do know is the US economy seems to be holding up relatively well,” said Tony Sycamore, market analyst at IG Australia.

Overnight, the S&P 500 rose 0.8 per cent and set an all-time high for the fourth time in five days. The Dow Jones added 344 points, or 0.8 per cent, and the Nasdaq composite gained 1 per cent.

The market’s gains were widespread, and companies whose profits can get the biggest boosts when workers are feeling confident helped lead the way. Expedia climbed 3.2 per cent, and Norwegian Cruise Line steamed 2.9 per cent higher.

US Federal Reserve chair Jerome Powell said policymakers were prepared to wait and see what impact tariffs would have on the economy.Credit: Bloomberg

Bank stocks were also strong, with Citigroup up 2.3 per cent, and JPMorgan Chase up 1.9 per cent.

The reaction was bigger in the bond market following the report from the US government, which said employers added 147,000 more jobs to their payrolls last month than they cut. The unexpected acceleration in hiring signals the US job market is holding up despite worries about how Trump’s tariffs may hurt the economy and inflation.

“There is nothing to complain about here,” according to Carl Weinberg, chief economist at High Frequency Economics. “You cannot find any evidence of a nascent recession in these figures.”

A separate report, meanwhile, said fewer US workers applied for unemployment benefits last week, an indication of easing layoffs.

Yields jumped in the bond market as investors bet the better-than-expected data could keep the Federal Reserve on hold when it comes to interest rates, instead of cutting them like Trump has loudly been calling for.

Traders in the futures market now see less than a 5 per cent chance that the Fed could cut its main interest rate at its next meeting later this month. That’s down sharply from the nearly 24 per cent chance they saw just a day earlier, according to data from CME Group.

The Fed’s chair, Jerome Powell, has been insisting that he wants to wait and see how Trump’s tariffs affect the economy and inflation before making its next move. While lower rates give a boost to the economy by making it easier to borrow money, they can also give inflation more fuel. And that could be dangerous if Trump’s tariffs are about to send inflation higher.

Many US companies in the services industries are still saying they’re concerned about the impacts of tariffs, even if they returned to growth last month following May’s contraction, according to the most recent survey by the Institute for Supply Management.

“Increased cost from tariffs and the potential for tariffs is impacting cost increases,” one company in the agriculture, forestry, fishing and hunting industry said in the survey.

The yield on the 10-year Treasury rose to 4.34 per cent from 4.30 per cent late on Wednesday. The two-year Treasury yield, which moves more closely with expectations for the Fed, jumped even more. It climbed to 3.88 per cent from 3.78 per cent.

On Wall Street, Datadog rallied 14.9 per cent after learning that its stock will join the widely followed S&P 500 index before trading begins on Wednesday. Many managers of funds either directly mimic or at least compare themselves against the S&P 500, which drives investment into any stock that joins the index.

Datadog will replace Juniper Networks, which combined with Hewlett Packard Enterprise in a merger.

On the losing side of Wall Street were companies that can feel pain from interest rates staying high.

Homebuilders would like rates to fall in order to make mortgages cheaper to get, for example, and Lennar sank 4.1 per cent, while D.R. Horton dropped 2.7 per cent.

All told, the S&P 500 rose 51.93 points to 6279.35. The Dow Jones added 344.11 to 44,828.53, and the Nasdaq composite climbed 207.97 to 20,601.1.

In stock markets abroad, indexes rose across much of Europe and Asia. South Korea’s Kospi climbed 1.3 per cent, and Hong Kong’s Hang Seng fell 0.6 per cent for two of the bigger moves.

With AP, Bloomberg

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