Energy stocks weigh on ASX; Star soars

By Jessica Yun

The Australian sharemarket slid further at lunchtime following a lacklustre performance on Wall Street overnight, during which stocks swung through shaky trading after the latest inflation update across the US.

The S&P/ASX 200 slid by 0.2 per cent or 14.7 points to 7,342.7 at 12:48pm (AEST) as energy stocks dragged down the whole bourse.

Wall Street jumped higher on the inflation report  but pared its gains in the afternoon.
Wall Street jumped higher on the inflation report but pared its gains in the afternoon. Credit: AP

It’s another busy day on the markets: retailers Baby Bunting, Nick Scali, News Corp and REA Group are all revealing their results today.

Shares in Rupert Murdoch’s News Corporation are 2.2 per cent higher even though News Corp Australia’s fourth-quarter revenue fell by 15 per cent. The company said the drop was affected by lower print and digital advertising.

Revenue for the Australian division, which houses titles including The Australian, The Daily Telegraph and the Herald Sun, was also down 8 per cent across the fiscal year.

The best performer so far today is Star Entertainment, which has skyrocketed 18.5 per cent as investors digest the news that NSW Treasurer Daniel Mookhey will defer the full implementation of poker machine duty rates in casinos until the end of the decade. Mookhey on Friday announced a revised, “transitional” arrangement for the planned duty rate increase on poker machine profits. The announcement confirmed the Herald’s story on Thursday.

Lake Resources is the biggest loser so far, down 4.8 per cent. Market heavyweights Rio Tinto and BHP are also dragging the bourse, down 1.4 per cent and 0.5 per cent respectively.

Overnight, the S&P 500 edged up by less than 0.1 per cent. It was just the second winning day for the index in the last eight, but it had been up 1.3 per cent in the morning before wobbling between small gains and losses.


The Dow Jones gained 0.2 per cent after giving up most of a strong morning gain. The Nasdaq composite added 0.1 per cent.

Thursday’s highly anticipated report showed US consumers paid prices that were 3.2 per cent higher in July than a year earlier. That’s a touch milder than the 3.3 per cent inflation rate economists expected to see and down sharply from last summer’s peak above 9 per cent. Beneath the surface, underlying trends for inflation were also within expectations.

The readings bolstered hopes among investors that the Federal Reserve’s campaign to grind down inflation is progressing and that maybe it could even be done hiking interest rates. High rates undercut inflation by slowing the entire economy and hurting investment prices, which raise the risk of a recession.

Treasury yields held relatively steady in the bond market after a report showed slightly more workers applied for unemployment benefits last week than expected. The number remains low compared with history, signalling the job market remains remarkably resilient despite much higher interest rates.

Fed officials would likely welcome some softening of the job market, which they would see as removing upward pressure on inflation.

Big US companies, meanwhile, continue to report mostly better profits for the spring than analysts expected. That’s usually the case, and analysts had particularly low expectations coming into this reporting season. Higher costs for workers and other expenses are broadly eating into profit margins.

Capri Holdings, which owns the Michael Kors, Versace and Jimmy Choo brands, soared 55.7 per cent as Big Fashion continues to consolidate.

Tapestry, the company behind luxury handbag and accessories retailer Coach, said it was buying the company for roughly $US8.5 billion ($13 billion). The deal would put it in better position to take on big European rivals, such as LVMH. Tapestry fell 15.9 per cent.

In the bond market, Treasury yields rose in the afternoon following an auction by the U.S. government of 30-year Treasury bonds. Yields have been generally rising recently amid concerns about heavy borrowing by the federal government. Those higher yields add pressure on the stock market.

The yield on the 10-year Treasury rose to 4.09 per cent from 4.01 per cent late Wednesday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more on expectations for the Fed, ticked up to 4.81 per cent from 4.80 per cent.


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