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ASX finishes lower after RBA decision; Seven, Southern Cross rally
Updated ,first published
Welcome to your recap of the trading day.
The numbers
The Australian sharemarket wiped out its morning gains and finished in the red, led lower by energy and financial stocks, after the Reserve Bank left interest rates on hold and sparked doubt about a cut at its next meeting on Melbourne Cup day.
The S&P/ASX 200 closed down 14 points, or 0.2 per cent, at 8848.80. Nine of its 11 industry sectors declined, with energy the biggest drag on the index after oil prices tumbled overnight. The Australian dollar jumped 0.4 per cent to US66.01¢ after the rate decision.
The laggards
Financial shares weighed down the market, with the big four banks trading lower for most of the session. CBA, the nation’s biggest stock, fell 0.9 per cent, National Australia Bank shed 0.3 per cent, ANZ Bank lost 0.5 per cent and Westpac ended flat. While their moves were modest, they were among the strongest forces weighing on the local bourse because financial stocks make up more than a third of the ASX.
But it was the energy sector that had the biggest declines after oil slumped overnight on signals that OPEC+ will hike production again in November. West Texas Intermediate fell 3.4 per cent to settle near $US63 a barrel, the biggest drop since June, while Brent closed below $US70. Oil and gas giants Woodside and Santos shed 1.7 per cent and 2.5 per cent, respectively, while the nation’s biggest refiner Ampol lost 1.2 per cent. Beach Energy lost 3.4 per cent.
The lifters
Gold miners climbed after bullion prices jumped another 2 per cent overnight to a record above $US3800 an ounce as precious metals surged, boosted by a weaker US dollar as investors weighed a potential US government shutdown. Northern Star Resources rose 1.2 per cent and Evolution Mining added 0.9 per cent.
However, Newmont fell 2.3 per cent after a surprise announcement that its chief executive Tom Palmer is retiring by the end of the year.
The big iron ore mining heavyweights also advanced, limiting the market’s decline. BHP jumped 1.5 per cent and Rio Tinto added 0.6 per cent. Fortescue turned south in late trading to finish down 0.3 per cent.
Kerry Stokes’ Seven West Media and Southern Cross Media rallied 7.1 per cent and 6.6 per cent, respectively, after announcing they plan to merge to create a $415 million television, radio and publishing company.
Shares of Star Entertainment resumed trading after being halted this morning before the embattled casino operator said it had secured a waiver to its loan conditions from its lenders, and would file its financial results by the end of the day. Star shares finished up 1.1 per cent.
The lowdown
The RBA left official interest rates steady at 3.6 per cent after its two-day meeting, noting that while inflation had fallen substantially since its peak in 2022, there were signs the rate of decline was slowing. Rates have been cut three times this year, most recently in August. Markets hadn’t expected the bank to make another cut at this week’s meeting.
A rate cut by year’s end – the monetary policy committee meets in November and December – is now considered a 50-50 chance. Sharemarkets like rate cuts as they lower borrowing costs for companies and consumers, which can boost spending and bolster corporate profits.
While the decision to leave rates on hold had been widely expected, David Bassanese, chief economist at Betashares, said the central bank’s decision “could be considered a ‘hawkish hold’ given the tone of the post-meeting statement potentially suggests the RBA is less inclined to cut interest rates in November than previously expected.”
The bank said recent data suggested that inflation for the September quarter may be higher than what the RBA forecast in its most recent economic outlook. Holding rates steady would give it more time to consider the outlook for the economy and inflation.
RBA governor Michele Bullock has refused to predict on when the RBA will cut interest rates again, saying decisions will be made depending on the data.
“I’m not going to predict what the interest rate is going to be in the next three to six months,” she told reporters in Sydney on Tuesday afternoon. “What I’m saying is that we have got a situation now, which is actually quite a positive situation.”
On Monday, US shares rose as technology stocks recovered some of their losses from late last week. The S&P 500 added 0.3 per cent. The Dow Jones rose 0.1 per cent, and the Nasdaq composite climbed 0.5 per cent. All three are near their all-time highs set a week ago.
Big Tech stocks ticked higher to lead the way on Wall Street. Amazon added 1.1 per cent following its 5.1 per cent drop last week, and Microsoft rose 0.6 per cent to recover some of its 1.2 per cent decline. Given their immense size, modest gains by tech giants like Amazon and Microsoft were enough to lift the S&P 500.
On the losing end of the market were companies in the oil business, which were hurt by the slumping crude prices. Drops of 2.6 per cent for Exxon Mobil and 2.5 per cent for Chevron were two of the heaviest weights on the S&P 500.
This week’s highlight on Wall Street is scheduled to arrive on Friday, when a report will be due about how many jobs US employers created and destroyed last month. The hope is that it will be balanced enough to keep the Federal Reserve on track to continue cutting interest rates.
The Fed just delivered its first cut of the year, and officials have penciled in more through the end of next year. That’s critical for investors because US shares have shot to records from a low in April in large part because of expectations for several cuts from the Fed. Easier rates can give the job market a boost and make investors more willing to pay high prices for shares and other investments.
If Friday’s job numbers prove too strong, they could make the Fed less willing to cut rates. That could hurt stocks, which already face criticism that they’ve become too expensive following their big rally. If the job numbers are too weak, they could mean a recession that would hurt share prices on its own.
One wild card may pop up in the interim: The US government is nearing a deadline that could result in its shutdown.
America has already had many such shutdowns in the past, which have caused only minimal waves for the US sharemarket and for the economy. But another shutdown could delay the collection and release of economic data, such as on jobs and inflation. Without those reports, increasing uncertainty on Wall Street could make markets more twitchy.
This shutdown may also be different because the White House may push for large-scale firings of federal workers this time around.
On Wall Street, Electronic Arts climbed 4.5 per cent after the video game maker confirmed rumours of a $US55 billion buyout. A group of investors will pay $US210 in cash for each share of EA, and they are calling it history’s largest all-cash deal to take a business private.
In other international markets, indexes mostly rose in Europe and Asia.
With AP, AAP, Bloomberg
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