Stocks dip as Federal Reserve in focus

A $1.25bn jump in Woolworths’ valuation has failed to keep the local benchmark in the black.

The Australian sharemarket has faded into the close, ending well in the red despite a $1.25 billion jump in Woolworths’ valuation.

At the closing bell, the benchmark S&P/ASX 200 index had backtracked 19.8 points, or 0.36 per cent, to 5,541.9, while the broader All Ordinaries index retreated 22.2 points, or 0.39 per cent, to 5,631.4.

The session may have been lacklustre, but it didn’t stop Woolworths from shining as investors seemed content in early progress on a gruelling five-year turnaround plan.

The retailer lost over $1 billion for the year, but talk of an uptick in comparable sales through the first quarter of fiscal 2017 as well as the confirmed exit from the home improvement space drove its shares up 3.9 per cent to $25.17.

At its peak in morning trade, Woolworths traded up 7.5 per cent.

The group’s path to an exit in home improvement also assisted a competitor as Metcash surged 6 per cent after a trading halt was lifted following its purchase of Woolies’ Home Timber and Hardware operation.

Its greatest rival, Wesfarmers, also gained, rallying 2.4 per cent after losing 2.2 per cent in the prior session on a mixed full-year update.

There was plenty of other news in the retail sector as Breville swung wildly before ending flat as traders digested its earnings report, while Fantastic bounded 11 per cent on news of a special dividend.

The action in retail belied subdued trade elsewhere as the bourse started on the back foot after losses on Wall Street. The US moves were driven by caution ahead of a crucial update on policy from the Fed.

“Trading conditions are likely to remain light ahead of a speech from Federal Reserve chair Janet Yellen at the conclusion of a meeting of global central bankers Friday night,” CMC Markets chief market strategist Michael McCarthy said.

He added crude and base metals had been caught out by a lift in the US dollar ahead of the planned Fed commentary.

“This kicks out two major sectoral supports for the recent local rally – materials and energy,” he said.

It proved the case throughout the session as traders happily took profits off the table after a strong run-up in the price of resources giants in recent months.

BHP Billiton weakened 1.8 per cent to $21.03, Rio Tinto eased 1.4 per cent to $49.10 and Fortescue tumbled 4 per cent from a two-year peak to $4.84.

The energy sector endured similar losses, with Santos off 2.2 per cent to $4.44.

Woodside bucked the trend, however, in advancing 1.4 per cent to $29.86.

In finance, investors turned wary on the big banks as ANZ lost 0.8 per cent, Commonwealth Bank gave back 0.6 per cent, NAB softened 0.8 per cent and Westpac slumped 1.3 per cent.

Earnings season also drew media groups into the spotlight, with Southern Cross soaring 12 per cent after offering better-than-expected guidance, Nine Entertainment adding 1 per cent as it rid itself of a costly content agreement with Warner Bros and Village Roadshow plunging 9 per cent as traders looked through the prospect of a special dividend and saw a disappointing earnings result.

Elsewhere, Iluka dove 7 per cent after swinging to a loss, Perpetual leapt 4 per cent as profit rose 8 per cent, Amcor bounded 4 per cent despite reporting a sharp decline in earnings and Costa Group retreated 4.5 per cent despite a five-fold increase in earnings.

Among blue chips, Telstra slipped 0.9 per cent to $5.25, while Qantas slid 2.6 per cent to $3.36.

Meanwhile, the Australian dollar moved clear of US76c, ending the local session around US76.25c.