ASX slides amid US election uncertainty; RBA fails to buoy sentiment

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

The numbers

The Australian sharemarket closed in the red on Tuesday after the Reserve Bank kept interest rates on hold as investors tread carefully ahead of the US central bank’s rate decision and the tight presidential election.

The S&P/ASX 200 fell 32.8 points, or 0.4 per cent, to 8131.90, with trading volumes for the session thinner than usual due to Melbourne Cup day. All 11 industry sectors were down, with utilities, banks and consumer staple stocks suffering the worst declines.

The tight US election is dominating Wall Street this week.Credit: Bloomberg

The lifters

Defying the wider market declines, the world’s biggest miner, BHP, rose 0.7 per cent after iron ore prices gained overnight.

Mineral Recourses bounced back to become one of the day’s top performers with a gain of 4.1 per cent. The stock had tanked 10 per cent on Monday over founder Chris Ellison’s resignation after the board found he used company resources for personal benefit.

Lifestyle Communities and embattled casino operator Star Entertainment Group were the index’s top performers for the trading day, adding 7.7 and 7.1 per cent respectively.

The laggards

With investors increasingly weary in the hours before the start of the tight US election, and a Federal Reserve rate decision ahead, global jitters also dominated the local sharemarket.

The big four banks were down, with National Australia Bank (down 0.2 per cent), Commonwealth Bank of Australia (down 0.3 per cent), Australia and New Zealand Banking Group (down 0.5 per cent) and Westpac (down 1.4 per cent) all declining. Energy stocks were also weaker, with Woodside and Santos down 0.3 per cent and 0.5 per cent, respectively.

Consumer stocks were another sector that suffered, with Kmart and Bunnings owner Wesfarmers falling 0.2 per cent, electronics retailer JB Hi-Fi shedding 1.5 per cent and burrito chain Guzman y Gomez falling 3 per cent.

Domino’s shares slumped 6.2 per cent after the pizza chain said its CEO Don Meij was leaving after 22 years, with former Coca-Cola executive Mark van Dyck taking over on Wednesday.

The lowdown

The ASX was down all day and showed little reaction to the widely expected decision by Australia’s central bank to keep rates on hold at 4.35 per cent, marking 12 months since it last lifted them.

In its quarterly monetary policy statement, the bank said, “underlying inflation is expected to return to the target range of 2-3 per cent in mid to late 2025 and to the midpoint of the target in late 2026”. The RBA has maintained it wants to see inflation “sustainably” in its target band before cutting rates.

GSFM investment strategy advisor Stephen Miller said investors were busy with the Melbourne Cup and bracing themselves for the outcome of the US election to respond to the RBA decision.

“[RBA holding rates] was a universally anticipated decision, so that in itself didn’t have much of an impact [on the market]. Quite clearly, what markets everywhere have got their eye on is the US election,” said Miller.

“The Federal Reverse also meets this week and will announce a decision very early Friday morning, I don’t expect that to have a big impact, particularly as it will take place against the backdrop where markets will probably still be trying to determine who’s won the US election.”

The overall unconvincing performance on the local bourse came after US stocks drifted lower overnight, with the S&P 500 and the Nasdaq both shedding 0.3 per cent and the Dow Jones losing 0.6 per cent.

History may be less foreboding. The broad US stock market has historically gone on to rise regardless of which party wins the White House. In 2020, US stocks climbed immediately after election day and kept going even after former President Donald Trump refused to concede and challenged the results, creating lots of uncertainty. A large part of that rally was due to excitement about the potential for a vaccine for COVID-19, which had just shut down the global economy.

“Bottom line – the US election is incredibly important, but the process is likely to be incredibly noisy,” according to Michael Zezas, a strategist at Morgan Stanley.

Another investment that’s become a barometer in the market for Trump’s perceived chances of victory was swinging sharply. Trump Media & Technology Group veered between a loss of 3.8 per cent and a gain of 6.3 per cent within the first half hour of trading overnight. It closed 12.4 per cent higher.

The stock of the company behind Trump’s Truth Social platform had been ripping higher from a bottom in September, until it hit a wall last week and dropped at least 11 per cent in three straight days.

Tweet of the day

Quote of the day

“To be clear, I find no evidence that anybody, at any stage, made a conscious or deliberate decision to introduce additional gunshots. It appears to be an inadvertent consequence of attempts to create clean, accurate and effective sequences in the story (...),” former ABC executive Alan Sunderland said about the interim “Line of Fire” review he initiated.

Audio of extra gunshots were added into three ABC reports on the Australian Army’s 2nd Commando Regiment in 2022. As Calum Jaspan writes, an interim report found on Tuesday morning that these gunshots were not deliberately added. 

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with AAP and AP

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