ASX extends losses; Origin Energy slumps as Atlas Arteria soars on $7b takeover bid

Energy stocks led the Australian sharemarket lower on Monday as investors reacted to developments in the Middle East and a report that Iran has offered the US a proposal to reopen the Strait of Hormuz.

The S&P/ASX 200 closed down 20.1 points, or 0.23 per cent, to 8766.4. Over the past five days it has lost 2.09 per cent. Nine of the market’s 11 sectors ended the day in the red.

Cautious optimism crept in as investors reacted to news of Iran’s plan. Conveyed through mediators in Pakistan, it calls for extending the ceasefire so the parties can work towards a permanent end to the fighting, Axios reported, citing people with knowledge of the matter.

Efforts to resume talks had faltered over the weekend when President Donald Trump cancelled a trip by his envoys and Tehran said it won’t negotiate under threat.

“Each time there is the whiff of a deal, the market is encouraged by the news, but the positive responses to each new announcement diminish with traders becoming fatigued,” said Sean Keane, chief strategist for Asia-Pacific at JB Drax Honore. “Equities markets want to rally, however, and they usually don’t need much encouragement to do so.”

Weighing on sentiment was oil’s upwards trajectory. Brent crude climbed by as much 2.1 per cent to $US107.97 per barrel, having earlier fallen to as low as $US106.19.

Energy stocks on the local bourse traded lower. Woodside Energy was down 1.47 per cent, Santos lost 1.8 per cent, Ampol shed 1.08 per cent and Viva Energy closed marginally lower (0.09 per cent).

Origin Energy slumped 5.01 per cent after releasing numbers for the March quarter that showed Australia Pacific LNG’s production output slipping, with revenue falling 12 per cent to $1.86 billion compared with the previous quarter. It also lowered earnings outlooks for its UK Octopus Energy business.

Atlas Arteria was the ASX 200’s biggest mover. The toll road owner’s stock soared 13.39 per cent after IFM Investors – controlled by Australia’s industry super funds – lobbed a $7 billion takeover at $4.75 per share, a bid that could rise to $5.10 if IFM’s stake goes above 45 per cent before the offer expires.

Financial stocks plateaued. The Commonwealth Bank slipped 0.81 per cent, ANZ Bank lost 0.8 per cent and Westpac slid 0.08 per cent, but National Australia Bank ended the day with a slight 0.3 per cent gain.

Local technology stocks failed to spark the enthusiasm seen in US markets when Intel roared past its 2000 peak during the dotcom boom to an all-time high. It soared 23.6 per cent for its best day since 1987 after reporting much stronger results for the first three months of the year than analysts expected. Chief executive Lip-Bu Tan said the next wave of artificial-intelligence technology is increasing the need for Intel’s chips and products, and the company’s forecast for profit in the spring topped analysts’ estimates.

Its blowout profit report led the US stock market to more records on Friday.

Strong profit reports have helped Wall Street rally to records, and the S&P 500 has leapt nearly 13 per cent in a little under a month. Hopes have also built in financial markets that the United States and Iran can find a way to avoid a worst-case scenario for the global economy because of their war.

The S&P 500 climbed 0.8 per cent and topped its prior all-time high, which was set on Wednesday. The Dow Jones dipped 79 points, or 0.2 per cent, and the Nasdaq composite rallied 1.6 per cent to its own record thanks to the jump for tech.

On the ASX, WiseTech shed 3.15 per cent, Technology One closed 0.58 per cent lower, NEXTDC slid 1.87 per cent and Xero ended marginally lower, by 0.6 per cent.

Mining stocks also had a mixed run. The world’s largest miner, BHP, edged up 0.11 per cent, rival Rio Tinto advanced 0.78 per cent and fellow iron ore miner Fortescue remained largely unchanged (down 0.05 per cent). Gold producer Evolution Mining gained 2.51 per cent, while Northern Star rose 1.28 per cent.

The Australian dollar was trading slightly higher at US71.70¢ by late afternoon.

In the US bond market Treasury yields eased as traders upped their bets on the possibility that the Federal Reserve could resume its cuts to interest rates later this year. The yield on the 10-year Treasury dipped to 4.30 per cent from 4.34 per cent late Thursday.

The path appeared to clear on Friday for Trump’s nominee to chair the Fed, Kevin Warsh, after the US Justice Department ended its probe into the Fed’s current chair, Jerome Powell.

Sentiment among US consumers remains sour. A survey by the University of Michigan found weaker sentiment in April across political party, income, age and education, though it improved a bit after the ceasefire in the war with Iran was announced earlier in the month.

With AP, Bloomberg

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