By Staff writers
The Australian sharemarket plunged after data showed inflation has unexpectedly jumped in the September quarter, dampening the chances of an interest rate cut at the Reserve Bank’s next meeting on Melbourne Cup Day.
Treading water in early trade, S&P/ASX 200 fell 59.80 points, or 0.7 per cent, to 8952.20 as of 12.11pm AEDT, led lower by financial stocks. The selldown came after the ASX lost 0.5 per cent on Tuesday. The Australian dollar rose 0.3 per cent to US66.01¢.
Data from the Australian Bureau of Statistics showed that headline inflation – the broadest measure of prices in the economy – came in at 1.3 per cent in the three months to September, higher than the June quarter’s 0.7 per cent, taking the annual rate of price growth from 2.1 per cent to 3.2 per cent.
Wall Street has been hitting fresh records, but inflation spoilt the party on the ASX.Credit: Bloomberg
Meanwhile, trimmed mean inflation – which removes the impact of the highest and lowest price changes – which the Reserve Bank keeps a close eye on, came in at 1 per cent for the three months to September and 3 per cent over the year, edging to the top of the bank’s 2 to 3 per cent target.
In its latest statement on monetary policy, the Reserve Bank said it expected headline inflation to climb to 3 per cent by the end of the year and for trimmed mean inflation to drop from 2.7 per cent to 2.6 per cent. The inflation data was the last piece of the economic puzzle for the central bank before it rate decision early next week.
Banking stocks led the market decline after the report, with the sector accounting for a third of the total ASX. CBA, the nation’s biggest stock, dropped 1.3 per cent after the data. National Australia Bank fell 1.6 per cent, Westpac lost 1.2 per cent and ANZ Bank slipped 0.4 per cent.
Wesfarmers, the nation’s largest discretionary retailer with its Kmart, Officeworks and Bunnings chains, fell 1.3 per cent.
Bucking the negative sentiment, Woolworth shares gained 1.5 per cent even after the supermarket giant reported weaker-than-expected sales figures for the September quarter. Chief executive Amanda Bardwell said the company’s performance “was below our aspirations” as food sales at its supermarkets rose 2.2 per cent in the quarter, falling short of analyst forecasts.
However, “there appear to be some (very early) green shoots,” Jarden analyst Ben Gilbert wrote in a note to clients, pointing to the supermarket’s October food sales of 3.2 per cent. If the September quarter “proves to be the trough and October to-date trends continue, the stock should do well.”
Pressure is rising on the Woolworths CEO, who will face shareholders at the company’s annual general meeting on Thursday, just as arch rival Coles will report its quarterly sales. Coles has been gaining market share on Woolworths. Coles shares dropped 0.6 per cent.
Oil and gas giants Woodside and Santos fell for a second session as oil declined further amid mounting signs of oversupply, which quelled a bumper rally triggered by US sanctions on key Russian producers last week. West Texas Intermediate fell 1.9 per cent to again settle close to $US60 a barrel, the steepest daily drop in more than two weeks. Woodside was down 1.2 per cent and Santos shed 0.8 per cent in early trade.
CSL also continued its slide, losing a further 5 per cent. The nation’s biggest health company slumped 15.9 per cent on Tuesday after vaccine scepticism led to a plunge in influenza vaccinations in the US, a key market, forcing it to issue a profit warning for its Seqirus vaccine business and delaying the unit’s planned spin-off into a separate company.
Building products maker James Hardie shed 1 per cent after US homebuilder D.R. Horton reported weaker profit for the Northern hemisphere summer than expected amid cautious consumer sentiment. James Hardie makes about three quarters of its sales in the US.
Mining heavyweights BHP and Rio Tinto advanced, up 0.7 per cent and 0.2 per cent, respectively, while gold miners got some reprieve after their recent losses. Northern Star climbed 2.7 per cent, Evolution Mining added 2.9 per cent and Newmont was up 1.8 per cent as gold steadied after a three-day rout to trade near $US3950 an ounce.
On Wall Street overnight, the S&P 500 added 0.2 per cent. The Dow Jones rose 0.3 per cent, and the Nasdaq composite climbed 0.8 per cent. All three indexes set all-time highs for a third straight day.
Moves were also relatively modest in the bond market as investors waits for a few events that could shake things up. On Wednesday, the Federal Reserve will announce its latest move on interest rates, while some of the US bourse’s most influential companies will report how much profit they made during the summer. On Thursday, President Donald Trump will meet China’s leader Xi Jinping in hopes of smoothing tensions between the world’s two largest economies.
Tech giants Apple (up 0.1 per cent) and Microsoft (up 2 per cent) both climbed, with both companies hitting a valuation of $US4 trillion during the session, joining AI giant Nvidia as the only publicly traded companies worth that figure. Microsoft hit the mark earlier in the year.
“We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for now are willing to overlook this as the AI arms race heats up.”
Amazon, meanwhile, rose 1 per cent after saying it will cut about 14,000 corporate jobs, or about 4 per cent of its corporate workforce, as it ramps up spending on artificial intelligence while cutting costs elsewhere.
Until then, profit reports from overnight and the morning were the main drivers of Tuesday’s action.
United Parcel Service rallied 8 per cent after delivering stronger profit and revenue for the latest quarter than analysts expected. UPS also gave a forecast for revenue in the all-important holiday shipping season that was slightly above analysts’ expectations.
PayPal climbed 3.9 per cent after saying it made a bigger profit during the summer than analysts expected. It also said it plans to pay its shareholders a dividend every three months, while announcing a deal where internet users will be able to pay for purchases through OpenAI’s ChatGPT.
On the losing end of Wall Street was Royal Caribbean, which lost 8.5 per cent despite reporting a stronger profit than analysts expected. Its revenue for the latest quarter fell short of expectations. The cruise operator also said it’s seen a “minimal” hit to its business this quarter because of bad weather, along with the temporary closure of one of its exclusive destinations in Haiti.
A slowing job market is one of the main reasons Wall Street expects the Fed to announce another cut to interest rates on Wednesday. It would be the second time this year that it’s lowered the federal funds rate in hopes of helping the job market.
The widespread expectation is that the Fed will also cut rates for a third time at its final meeting of the year. A lot is riding on that, in part because US stock prices have already rallied to records on expectations for it. That means the most important part of Wednesday’s announcement for Wall Street will be whether Fed Chair Jerome Powell gives any hints about upcoming moves.
Fed officials have indicated that they’re likely to keep cutting interest rates next year, but they may have to change course if inflation accelerates beyond its still-high level. That’s because low interest rates can make inflation worse.
In the bond market, the yield on the 10-year Treasury eased to 3.97 per cent from 4.01 per cent late Monday. A report showing confidence among US consumers is a smidgen better than economists expected had little effect on the market.
with AP, Bloomberg
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Disclaimer : This story is auto aggregated by a computer programme and has not been created or edited by DOWNTHENEWS. Publisher: www.smh.com.au
