Australian shares dip as Chinese economy wobbles

By Millie Muroi

Welcome to your five-minute recap of the trading day, and how experts saw it.

The numbers

The Australian sharemarket opened softer on Wednesday, paring back some of the gains in the previous session after the Reserve Bank pressed pause on its rate rises, as underwhelming economic data out of China gave traders cause for concern.

When Wall Street is closed, trading volumes drop everywhere: London’s FTSE closed 0.1 per cent lower in thin trading.
When Wall Street is closed, trading volumes drop everywhere: London’s FTSE closed 0.1 per cent lower in thin trading.Credit: Bloomberg

The S&P/ASX 200 was down 25.8 points, or 0.4 per cent, to 7253.2 at the close. All sectors except communication services and utilities traded in the red, with the market lacking direction from Wall Street, which was closed overnight for the Independence Day holiday.

Relief from interest rate rises may be short-lived after the Reserve Bank flagged more increases could be on the cards. RBA governor Philip Lowe said the July pause would let the central bank assess the impact of its 12 previous rate rises, but warned more might be needed to get inflation under control.

Meanwhile, Chinese manufacturing data came in well below consensus expectations, reinforcing fears Australia’s largest trading partner is heading for a slowdown.

The lifters

Communications services (up 1.1 per cent) and utilities (up 0.6 per cent) were the only sectors in the green as Telstra (up 1.2 per cent) advanced, along with Seek (up 3.9 per cent) and electricity generator Mercury NZ (up 6.6 per cent) – the biggest large-cap advanced – and AGL (up 2.4 per cent).

The laggards


AMP shed 6.1 per cent after its shares were halted from trade as the wealth management giant assessed “the full effect” of a judgement by the Victorian Federal Court in a class action over the reduced prices it offered to pay some of its financial advisers to buy their financial planning businesses. The court “accepted evidence of the loss incurred by the […] lead applicant (Equity Financial Planners – $813,560) and the sample group member (Wealthstone – $115,533),” AMP said.

Treasury Wine Estates dropped 0.4 per cent after saying it will close a Victorian winery used to make budget wines to account for the fact that drinkers are increasingly ditching cheaper wine in favour of premium and luxury wines.

Financials (down 0.8 per cent) were among the weakest companies on the local bourse as ANZ (down 0.8 per cent), Westpac (down 0.7 per cent), CBA (down 0.5 per cent) and NAB (down 0.8 per cent) all dropped. Macquarie Group also fell, shedding 0.5 per cent.

The energy sector (down 0.6 per cent) weighed down the ASX as Woodside (down 0.4 per cent) and Santos (down 0.5 per cent) declined despite a 2.1 per cent increase in Brent Crude oil prices. Coal miners Yancoal (down 0.8 per cent) and Whitehaven (down 1 per cent) also pulled back.

Healthcare (down 0.8 per cent) was the weakest sector with Cochlear (down 1.7 per cent) and Pro Medicus (down 2.3 per cent) among the biggest large-cap decliners.

The lowdown

IG Australia market analyst Tony Sycamore said data from China weighed on the Australian sharemarket on Wednesday but that it could mean the Chinese government was getting closer to announcing a stimulus package.

“There was pretty dire data from China which heightened fears that the Chinese economy is heading for a double-dip slowdown,” Sycamore said. “It’s not good for the ASX 200 in the short term but in the medium term, it probably means that Chinese authorities are one step closer to bringing to the table a meaningful stimulus package.”

Sycamore said coal miners in particular were hit hard by the news, but that there was also a broader “risk off” sentiment in markets with sectors such as healthcare performing weaker.

Meanwhile, he said some consumer discretionary companies and the communications sector bolstered the local bourse.

“The consumer discretionary sector is certainly enjoying the tailwind of the lower CPI number and the fact that the RBA kept rates on hold,” Sycamore said. “And Telstra is up about 0.8 per cent on the back of an upgrade from a European banking giant.”

In overseas markets, European stocks edged higher overnight in thin trading, led by gains in real estate and healthcare shares as investors looked ahead to the monthly report on US employment on Friday for clues to how high interest rates in the world’s largest economy will go.

The Stoxx Europe 600 Index edged up 0.1 per cent by the close in London, having gained as much as 0.3 per cent earlier in the session. Real estate stocks led gains, while carmakers declined. London’s FTSE 100 index closed 0.1 per cent lower, and Germany’s DAX lost 0.3 per cent.

Semiconductor stocks fell after China imposed restrictions on the export of gallium and germanium — two metals that are crucial to parts of the chip industry. Aixtron and IQE were among the sector’s decliners, alongside STMicroelectronics, which is reliant on gallium and germanium for gallium nitride and silicon germanium product lines.

While resilient earnings and bets that central banks will slow their interest-rate-hiking pace have bolstered global markets for the first half of the year, strategists are increasingly saying that recessionary headwinds will weigh on trading for the rest of 2023.

Investors are closely watching America’s jobs report on Friday for clues on the Federal Reserve’s future rate moves.

“Investors are assessing the ongoing impact of tighter monetary policy and the resilience of economies to withstand further interest rate hikes,” Susannah Streeter, head of money and markets at Hargreaves Lansdown. Additionally, the back-and-forth between the US and China over rare metal export curbs may lead to “fresh supply chain snarl ups which could prove inflationary for some sectors,” she warned.

On commodities markets, oil traded above $US71 a barrel a day after OPEC+ linchpins Saudi Arabia and Russia agreed to prop up prices by curbing supply. West Texas Intermediate climbed about 2 percent in New York, though volumes were subdued due to the July 4 holiday. In a flurry of announcements on Monday, Saudi Arabia said it will prolong a unilateral 1 million barrel-a-day supply reduction into August, while Russia declared a cut in exports and output.

Tweet of the day

Quote of the day

“A number of factors contribute to our shifting vineyard footprint, including changing consumer trends and wine preferences as well environmental changes, such as higher temperatures and reduced access to water,” said Treasury Wine chief supply officer Kerrin Petty as the firm looks to shut down one of its Victorian wineries used to make budget brands such as 19 Crimes and Wolf Blass and sell two vineyards, putting 60 jobs on the line.

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with Bloomberg, AAP

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