ASX declines after US jobs surprise; Newcrest soars
By Millie Muroi
The Australian sharemarket traded in the red on Monday, following losses on Wall Street on Friday after surprisingly strong US jobs data sparked concerns the Federal Reserve would have to continue its aggressive fight to tame inflation.
The S&P/ASX 200 dropped 8.9 points, or 0.12 per cent, to 7,549.2 at midday, despite futures over the weekend pointing to a stronger start, as investors gauge economic and corporate news to see if last month’s optimism for share prices was justified. The local bourse gained 6.2 per cent gain in January, its best-ever start to a year.
While it’s the start of corporate reporting season this week, the defining market event is Tuesday’s interest rate decision by the RBA, with most economists predicting that Australia’s central bank will raise its cash rate to 3.35 per cent from 3.1 per cent, the highest level since September 2012. The Commonwealth Bank has highlighted the possibility of a bigger hike to 3.5 per cent.
Energy and materials sectors buoyed the index, as shares in the nation’s biggest gold miner, Newcrest, surged more than 11 per cent to $24.98.
It comes as the company confirmed it had received a $24.5 billion takeover proposal from US gold miner Newmont Corporation, having rejected an earlier bid which it found too low. The new all-scrip proposal would entitle shareholders to receive 0.38 Newmont shares for each Newcrest share they own, a 22 per cent premium to Newcrest’s last closing price on Friday.
Meanwhile, the local earnings season kicked off this morning with reports from furniture retailer Nick Scali as well as investment company Argo and property trust Dexus Convenience Retail.
Nick Scali said its net profit jumped 70 per cent to 60.6 million in the December half, thanks to record deliveries. While the company flagged a slowdown from the COVID-19 boom for home goods, it said trading remained “better than pre-COVID-19 despite rising interest rates”. Shareholders decided it was time to take profits though and sold off the stock, pushing it down by 10.7 per cent.
Dexus fell 1.7 per cent after reporting a 92.2 per cent fall in statutory net profit to $3.1 million in the same period as it wrote down the value of its investment properties by $14.9 million. The broader real estate sector was the biggest weight on the ASX200, dropping 1.3 per cent.
On Wall Street on Friday, major US stock indexes fell in choppy trading after the job market report, while investors digested a mixed bag of megacap company earnings reports. US job growth accelerated sharply in January, with nonfarm payrolls surging by 517,000 jobs, well above an estimate of 185,000. The unemployment rate hit a more than 53-1/2-year low of 3.4 per cent
Investors have been balancing hopeful signs that the economy could avoid a feared recession against concerns about how long the Fed will keep interest rates high to rein in inflation. The S&P 500 gained earlier this week after more dovish-than-expected comments from Fed Chair Jerome Powell, who acknowledged progress in the fight against inflation.
The jobs report “was an incredible surprise, and it raises a lot of questions about what the Fed is going to do next,” said Kristina Hooper, chief global market strategist at Invesco. “What I think is causing some of the volatility is markets trying to make sense of how the Fed will perceive this.”
The Dow Jones Industrial Average fell 0.39 per cent to 33,921.78, the S&P 500 lost 0.91 per cent to 4,141.88 and the Nasdaq Composite dropped 1.25 per cent to 12,048.74.
Wall Street’s main indexes have had a solid start to the year as tech and other stocks that struggled last year have rebounded, fuelled by hopes that the Fed’s rate hikes would soon end and the world’s largest economy might be able to navigate a soft landing.
On Friday, US investors were also digesting another heavy batch of corporate results.
Shares of Apple, the largest US company by market value, were up 3 per cent. The company forecast that revenue would fall for a second quarter in a row but that iPhone sales were likely to improve as production had returned to normal in China.
Shares of Amazon slumped more than 7 per cent as the company said operating profit could fall to zero in the current quarter as savings from layoffs do not make up for the financial impact of consumers and cloud customers clamping down on spending.
Alphabet shares shed over 2 per cent after the Google parent posted fourth-quarter profit and sales short of Wall Street expectations. In other corporate news, Ford Motor shares slid over 7 per cent after the automaker predicted a difficult year ahead.
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Source: Thanks smh.com