By Millie Muroi
Miners dragged down the Australian sharemarket on Wednesday as key commodity prices fell and Wall Street closed lower overnight.
The S&P/ASX 200 was down 18.6 points, or 0.3 per cent, to 7339.2 in early trade, even as healthcare and information technology companies climbed. The Australian dollar was also sharply lower, dropping by nearly 1 per cent overnight to fetch 67.92 US cents at 10.26am AEST.
Shares of TPG Telecom plunged 8.8 per cent, making it the biggest large-cap decliner, after the Australian Competition Tribunal blocked its deal with Telstra to share infrastructure in regional Australia.
Rex Airlines’ stock dived 15.4 per cent after it warned it no longer expected to make a profit in the 2023 financial year and would swing to an operational loss of $35 million.
But it was the mining heavyweights that were the biggest drag on the local bourse after the iron ore price fell 0.8 per cent overnight. Rio Tinto dropped 1.3 per cent after flagging a $US498 million ($733 million) investment in a copper mine in Utah, BHP shed 1.8 per cent as it announced a 30 per cent carbon emissions reduction target by 2030, and Fortescue fell 2.1 per cent after former chief executive Andrew Forrest and his wife donated one fifth of their shares to their philanthropic foundation.
Gold companies and energy stocks (down 0.9 per cent) also retreated following a 0.8 per cent fall in Brent Crude oil prices and a 0.7 per cent slide in the spot gold price. Heavyweight Woodside (down 1.5 per cent) and gold miners Northern Star (down 1.5 per cent), Evolution Mining (down 1.5 per cent) and Newcrest (down 1.4 per cent) all slipped.
Meanwhile, growth stocks including those in information technology (up 0.3 per cent) and healthcare (up 0.3 per cent) rose. Seek (up 2 per cent), WiseTech (up 1.4 per cent) and Technology One (up 1.2 per cent) all lifted along with Cochlear (up 1.7 per cent) and ProMedicus (up 1.1 per cent).
Consumer staples (up 0.3 per cent) also edged up including supermarket giants Woolworths (up 0.7 per cent) and Coles (up 0.6 per cent).
Overnight on Wall Street, stocks pulled back in their first day of trading after a five-week rally carried the US sharemarket to its highest level since last year. The S&P 500 fell 0.5 per cent, the Dow Jones dropped 0.7 per cent and the Nasdaq composite lost 0.2 per cent.
The US sharemarket took a step back following many steps forward on hopes the economy can avoid a recession and inflation is easing enough for the Federal Reserve to stop raising interest rates soon. A frenzy around artificial intelligence has also vaulted a select group of tech stocks to huge gains.
Those hopes are battling against worries that stubborn inflation will force the Fed to keep interest rates higher for longer, which could grind down the economy. With some of the easiest improvements in year-over-year inflation soon to be lapped, a tougher road may be ahead for both the US economy and financial markets.
“Leaning on the lessons of the 1970s, the Fed is right to be cautious, even if that represents an inconvenient truth for stock investors,” said Lisa Shalett, chief investment officer of Morgan Stanley Wealth Management.
During the 70s, inflation remained high for much longer than hoped, forcing the Fed to ultimately drive the economy into a painful recession by sharply hiking interest rates.
In China, meanwhile, the world’s second-largest economy is stumbling in its recovery following the relaxation of anti-COVID restrictions.
Stocks in Hong Kong tumbled 1.5 per cent on Tuesday after China’s central bank cut interest rates by less than some investors had hoped. Stocks in Shanghai slipped 0.5 per cent amid disappointment Chinese authorities didn’t do more to support one of the world’s main drivers of economic growth.
One of China’s biggest corporations, Alibaba Group, also fell after it shook up its top management and announced a new chief executive officer. Its stock trading in the US dropped 4.5 per cent.
Tuesday also marked the first trading for Wall Street following a meeting between Chinese leader Xi Jinping and US Secretary of State Antony Blinken. It yielded no signs of progress from either of the world’s largest economies on Taiwan, human rights, technology and other issues of contention.
Most of Wall Street fell, with four out of five stocks in the S&P 500 lower.
Worries about the global economy’s strength dragged down prices for crude oil and stocks of companies that pull it from the ground. Energy stocks fell 2.3 per cent for the largest loss among the 11 sectors that make up the S&P 500. Exxon Mobil fell 2.3 per cent, and Chevron lost 2.3 per cent.
In the bond market, the yield on the 10-year Treasury fell to 3.71 per cent from 3.77 per cent late Friday. It helps set rates for mortgages and other important loans.
The two-year yield, which moves more on expectations for the Fed, slipped to 4.68 per cent from 4.72 per cent.
This upcoming week doesn’t have many potentially market-moving events coming off a Monday closure in observance of the Juneteenth national holiday.
Fed Chair Jerome Powell will testify before Congress on Wednesday and Thursday. Last week, the Federal Reserve held its benchmark lending rate steady, the first time in more than a year that it didn’t announce an increase. But it also warned it could raise rates twice more this year.
The Bank of England will meet on interest-rate policy on Thursday. Central banks around the world are heading in diverging directions as they battle inflation amid worries about a pressured global economy.
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Source: Thanks smh.com