ASX falls for a third day, dragged down by banks as NAB shares plunge

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

The numbers

The Australian sharemarket closed firmly in the red on Wednesday, weighed down by the big four banks after NAB reported slimmer profits amid rising competition for mortgages and deposits.

The S&P/ASX 200 fell sharply early in the session before paring some of those losses to close down 61.80 points, or 0.7 per cent, at 8419.20 points. It’s the third day of declines as the market lost 0.7 per cent on Tuesday, when Reserve Bank governor Michele Bullock poured cold water on the central bank’s first interest rate cut for the first time in five years with comments that dashed hopes for a series of more cuts over the coming months.

Six of the 11 industry sectors traded in the red, with the energy and banking sectors posting the biggest losses. The Australian dollar edged up 0.2 per cent to US63.68¢.

NAB’s underwhelming result triggered a sell-down in banking stocks.Credit: Bloomberg

The lifters

On the winning side, miners advanced in early trade as iron ore prices strengthened overnight, and as investors continued to digest BHP’s results from Tuesday, but the sector gave up some of those gains to end unchanged.

While BHP finished flat, rival Rio Tinto rose 1.1 per cent on the news that Japanese trading house Mitsui will take a 40 per cent stake in the Rhodes Ridge iron ore project in Western Australia’s Pilbara region and form a joint venture with Rio to mine the site. The deal comes as Rio struggles to maintain production of superior quality iron ore grades in the Pilbara. Rhodes Ridge may help offset declines elsewhere.

James Hardie rose 1.6 per cent despite reporting slimmer December quarter profits due to declining sales volumes in a tough market. UBS analyst Lee Power said the earnings were better than expected, and a “great result in [an] environment where rates are elevated and headline data looks soft”.

Online employment advertiser Seek gained 5.2 per cent, lifting the communication services sector into the green. Medical imaging software company Pro Medicus rallied 5.2 per cent.

Real estate investment trust Goodman Group – the nation’s biggest property stock – placed its shares in a trading halt after announcing a $4 billion sale of new shares to fund its expansion into data centres. The company said it would issue 119.42 million shares at $33.50, a 6.9 per cent discount on its last closing price.

The laggards

The banking sector slumped for a second day, dragged down by an 8.1 per cent slump in NAB shares after the lender reported a squeeze on earnings in its latest quarter. Cash profit fell 2 per cent to $1.7 billion in the three months to December 31, the nation’s second-biggest bank announced.

NAB’s rivals also traded in the red, with CBA - the biggest stock on the ASX – down 0.9 per cent, Westpac down 0.3 per cent and ANZ Bank down 1.6 per cent.

A slew of other major companies across the local bourse posted weaker than expected results, which saw share prices drop – Mineral Resources shares plunged 20.7 per cent after posting a half-year loss of more than $800 million.

Santos sent the energy sector lower, losing 4.5 per cent after the company said its full-year profit fell 14 per cent to $US1.22 billion ($1.97 billion) due to lower oil and gas prices, and cut its final dividend by 41 per cent.

The lowdown

NAB’s result added to concerns that pressure is building on banking margins, with the RBA’s rate cut creating additional headwinds as the big four banks moved to lower their home loan rates.

Saxo Bank’s Asia Pacific senior trader Junvum Kim said NAB’s declining cash earnings and its “modest” growth of 7 per cent in business lending highlighted the competitive environment for the nation’s lenders.

NAB’s cash earnings were trending slightly below analyst expectations, noted UBS analyst John Storey, who said the bank’s “credit quality looks worse than expected”.

Meanwhile, economic data released on Wednesday highlighted a drab outlook for workers as wage growth in the fourth quarter of 2024 slowed to its lowest rate in nearly three years. The Australian Bureau of Statistics said wages edged up 0.7 per cent in the December quarter – the lowest quarterly growth since March 2022.

In the US overnight, Wall Street fluttered to a record after US stock indexes drifted through a mixed day of trading.

The S&P 500 edged up by 0.2 per cent to finish just above its all-time high set last month. The Dow Jones was close to flat, while the Nasdaq composite rose 0.1 per cent.

US stocks have broadly climbed back toward record heights even though big recent disruptions seemed set to derail their long, upward trend that began in 2022.

Hanging over everything has been the threat of a punishing global trade war following President Donald Trump’s announcements of tariffs. But Wall Street has been taking such actions increasingly in stride, believing they are merely tools for negotiations and that they’ll ultimately be less painful for markets and the economy than they may seem initially.

Tweet of the day

Quote of the day

“Could it be that the bank share price party is over? The analysts are certainly waiting for their ‘I told you so’ moment. They’ve been waiting for a while.”

That’s Elizabeth Knight in her column on overvalued bank shares, and their declines this week.

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With AP, Bloomberg

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