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Mining heavyweights BHP, Rio drag down ASX
Updated ,first published
Welcome to your five-minute recap of the trading day and how experts saw it.
The numbers
Miners and consumer stocks weighed down the Australian sharemarket on Thursday after Wall Street declined, with traders poring over the Federal Reserve minutes to gauge what action the US central bank will take later this month.
The S&P/ASX 200 was down 89.8 points, or 1.2 per cent, to 7163.4 at the close as all sectors except information technology traded in the red.
The lifters
Information technology companies (up 0.1 per cent) were among the most resilient, as WiseTech (up 1 per cent), data centre operator NEXTDC (up 0.3 per cent) and Xero (up 0.1 per cent) all advanced.
Meridian Energy (up 4.4 per cent) was the biggest large-cap advancer, along with toll roads operator Atlas Arteria (up 1 per cent) and Carsales.com (up 0.8 per cent).
The laggards
Miners (down 1.9 per cent) were among the weakest companies on the local bourse, with iron ore heavyweights BHP (down 2.3 per cent), Fortescue (down 1.7 per cent) and Rio Tinto (down 1.4 per cent) all declining. Gold miners were weaker amid a 0.5 per cent drop in gold prices, with Evolution Mining shedding 2.6 per cent and Newcrest dropping 1.5 per cent.
Consumer discretionary companies (down 1.9 per cent) were also weaker with Wesfarmers losing 2.6 per cent and Aristocrat Leisure sliding 2.1 per cent.
The lowdown
Tribeca Investment Partners portfolio manager Jun Bei Liu said the market remained cautious with worries that inflation may stay higher for longer in the US and Australia.
“We’ve gone into a bit of a risk-off mode, and it was really only tech companies and defensive stocks holding the market together on Thursday,” Liu said.
Liu said technology companies performed better because their earnings didn’t tend to be impacted too strongly by the economic cycle and because a peak in interest rates was in sight.
But she said miners were softer as investors worried about what was happening in China and how quickly the country might return to growth.
On Wall Street, the S&P 500 slipped 0.2 per cent following the release of the minutes of the Fed’s last policy meeting, while the Dow fell 0.4 per cent and the Nasdaq gave back 0.2 per cent.
The June gathering threw Wall Street for a loop as officials paused their rate-hiking cycle after 10 consecutive increases. The Fed’s minutes released overnight showed division among members of the Federal Open Market Committee, where some would have preferred another hike in June amid a tight US labour market.
“This adds to the high probability the Fed hikes again on July 26,” Ian Lyngen, a strategist with BMO Capital Markets wrote. “The FOMC minutes deliberately left investors with the impression that June’s pause was a close call and that a July hike is the committee’s base case scenario.”
Investors will be closely watching America’s June employment report coming out on Friday for signs of a cooling labour market.
“Our view is that the recession won’t strike until next year,” said Benjamin Kirby, co-head of investments at Thornburg Investment Management.
The yield on policy-sensitive two-year Treasuries was little changed at 4.94 per cent, while the 10-year advanced to 3.94 per cent. That inverted yield curve is often read as a sign of a coming economic slump.
The Fed has forecast two additional rate increases this year, which could further weigh on economic growth and corporate profits. The Fed’s next rate decision is due in three weeks.
“I am the most bearish I have ever been on the economy without being in a recession, and it’s because of the yield curve, the contraction of money and [quantitative tightening] at the same time they are hiking rates,” Ed Hyman, founder and chairman of Evercore ISI, said on Bloomberg TV.
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Millie Muroi is the economics writer at The Sydney Morning Herald and The Age. She was formerly an economics correspondent based in Canberra’s Press Gallery and the banking writer based in Sydney.Connect via X or email.