ASX closes higher as trade talk hopes boost energy and mining stocks

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

The numbers

Large rises in energy stocks coupled with moderate growth in most other sectors was able to offset a poor day of performance for healthcare, allowing the bourse to remain relatively flat throughout Wednesday.

Another day of losses on Wall Street made for a lacklustre morning on the ASX.Credit: Bloomberg

Australian shares had been expected to slip after Wall Street fell almost 1 per cent overnight but the S&P/ASX 200 closed 26.9 points, or 0.3 per cent, higher, reaching 8178.3, with nine of the 11 sectors rising. The Australian dollar was trading at US64.85¢ after closing.

The lifters

The strongest performing sector was energy, which was up a 2.1 per cent. Ampol, which rose 2.8 per cent, led the sector, followed by a strong rise at Santos (up 2 per cent), Woodside (up 1.7 per cent), and Yancoal (up 1 per cent). Energy and telecom firm Mercury NZ finished 3.4 per cent higher.

The real estate and consumer discretionary sectors both gained 0.8 per cent. Buy now, pay later group Zip Co was the top 200’s best performer, rallying 13 per cent to $1.83 after announcing it would double its earnings this financial year.

It was also a strong day for Qantas, which rose 3.3 per cent. Results were mixed for the big banks, with NAB and ANZ up 1.6 per cent and 0.5 per cent respectively. Commonwealth Bank and Westpac fell 0.5 per cent and 0.1 per cent respectively.

Macquarie managed to rise 1 per cent despite ASIC calling for an independent expert to review the bank’s futures dealing business and over-the-counter derivatives trade reporting.

The laggards

Healthcare was the hardest-hit sector on Wednesday, dropping by 1.5 per cent off the back of a poor performance at Telix Pharmaceuticals (down 3.4 per cent) and CSL (down 3 per cent). The only other sector with negative movement was information technology – with a 0.1 per cent dip. The downturn was fuelled by data centre operator NEXTDC, which fell 1 per cent, despite being yesterday’s top-performing stock. WiseTech Global (down 0.4 per cent) and Xero (0.3 per cent lower) also fell.

The day’s worst performing individual stock was Lynas Rare Earths, which slumped 4 per cent. It was also a particularly difficult day for NUIX, which lost 16 per cent, closing at $1.99 after withdrawing guidance. The stock’s 52-week high was $7.85.

The lowdown

Two long-awaited headlines have helped Australian shares lift higher, but the modest gains may signal residual gloom in the global economy.

Investors rejoiced after the White House announced it would hold trade talks with Beijing officials later this week and as China’s central bank flagged plans to cut its key interest rate to boost economic growth.

“Obviously good news that China has cut its key lending rates, but what it indicates about trade talks is they’re not overly optimistic,” IG Markets analyst Tony Sycamore said.

“Yes, it puts more liquidity in the system, but if people aren’t willing to borrow and aren’t willing to spend, then you’ve got to get that fiscal stimulus.

“It feels like we’re waiting for that next catalyst.”

Talk of further interest rate cuts have continued following Labor’s thumping success at this weekend’s federal election, with Citi predicting a lower terminal cash rate of 3.1 per cent, down from 3.6 per cent, for the year.

“The market is currently pricing front-loading of rate cuts from the RBA [Reserve Bank of Australia]. In our view, the domestic fundamentals call for a wait-and-see approach, and this is likely the path the RBA will go down,” Citi economists said.

“This implies that the front end remains too rich. We do see the RBA cutting by 100 basis points this year, but the path will be more considered as the hard data from global tariff dispute begins to come through via lower inflation.”

NAB economists are forecasting rolling rate cuts over the next year to 2.6 per cent.

Business confidence was down 9.3 points to 96.7, according a Roy Morgan study, matching a similar trend in the lead-up to the 2022 federal election.

“All five business confidence indicators fell during April as global uncertainty sparked by President Donald Trump’s ‘Liberation Day’ tariffs, as well as the political uncertainty of an election campaign, caused a sharp fall in confidence about business prospects and the state of the Australian economy,” said Michele Levine, CEO of Roy Morgan.

“Although President Trump’s tariffs on Australian exports were at the base rate of 10 per cent, there were significantly higher tariffs on Australia’s main trading partner, China. The uncertainty caused by a potential trade war between the world’s two largest economies led to significant sharemarket falls worldwide – including in Australia.”

US equity-index futures rose and the US dollar strengthened on confirmation of trade talks, after US officials said US Treasury Secretary Scott Bessent and chief trade negotiator Jamieson Greer would meet China’s top economic official in Switzerland on Saturday in what could be a first step towards easing the trade war disrupting the global economy.

Girding for fallout from the trade tensions, China on Wednesday reduced its policy rate and lowered the amount of cash lenders must keep in reserve.

“The US abuses of tariffs have severely disrupted global economic and trade orders,” China Securities Regulatory Commission Chairman Wu Qing said at a briefing as the monetary easing was announced.

On Wall Street overnight, stocks fell and bonds rose as more US companies scrapped their profit forecasts because of uncertainty created by Trump’s global tariff war. After almost wiping out losses, the S&P 500 closed with a drop of 0.8 cent. The Dow Jones was down 1 per cent and the Nasdaq composite lost 0.9 per cent.

Palantir Technologies was one of the heaviest weights on Wall Street after falling 11.9 per cent. The company, which offers an AI platform for customers, dropped even though it reported a profit for the latest quarter that met analysts’ expectations and raised its forecast for revenue over the full year.

AI-related companies have been finding it more difficult to convince investors to support their stocks after they’ve already shot so high. Palantir’s stock’s price remains near $US110, when it was only $US20 less than a year ago.

The return to earth for AI stocks is happening as US President Donald Trump’s tariffs change the economic landscape for other companies.

Regardless, all the will-he-won’t-he uncertainty around tariffs has already made American households more pessimistic about the economy and could affect their long-term plans for purchases. That uncertainty has helped fuel a surge in imports ahead of potentially more severe tariffs ahead.

The US trade deficit soared to a record $US140.5 billion in March as consumers and businesses alike tried to get ahead of tariffs that went into effect in April and others that have been postponed until July. That follows another update from last week showing that the US economy shrank at a 0.3 per cent annual pace during the first quarter of the year because of a surge in imports.

The US Federal Reserve has begun its two-day meeting, and will announce its next move on interest rates Wednesday (Thursday morning AEST). Virtually no one expects it to do anything to its main rate, even though Trump has been advocating for cuts.

“While the possibility still exists for potential rate cuts later this year, the economic picture is complicated, and it’s too early to know if or when those cuts might happen,” said Michele Raneri, vice president and head of US research and consulting at TransUnion.

Lower interest rates could help goose the US economy, but they could also give inflation more fuel. And worries are already simmering that Trump’s tariffs could push inflation higher.

Markets were mixed across Europe and Asia. Indexes rose 1.1 per cent in Shanghai and 0.7 per cent in Hong Kong.

Tweet of the day

Quote of the day

‘The Trump administration, by trying to blow up the post-war order and the multilateral institutions that support it with “America First” policies, is making even its long-term allies (all of them on the receiving end of Trump’s tariffs) question whether they can trust America, and whether it’s still a safe and attractive place to invest.’

That’s columnist Stephen Bartholomeusz on investor’s flight from the United States as Trump’s erratic trade policies make foreign currencies feel like a “safe haven”.

With AAP, AP, Bloomberg

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