ASX starts week in the red; miners weak, CBA slips

Welcome to the recap of the trading day.

The numbers

Australia’s sharemarket has clawed back most of an early-session sell-off to finish the day slightly lower.

The S&P/ASX 200 fell 13.1 points, or 0.2 per cent, to 8851.8, as the broader All Ordinaries lost 9.2 points, or 0.1 per cent, to 9119.5.

Only four sectors finished down for the day, but materials stocks were heavy, with weakness in large-cap miners and some profit-taking in gold miners after last week’s rallies.

The Australian dollar held on to recent gains, fetching US66.59¢ and on par with Friday evening, supported by strong iron ore prices last week and as US rate cut hopes weigh on the greenback.

The lifters

Energy stocks moved higher as oil extended a gain from last week, as traders weighed moves to crack down on Russian flows against forecasts for a surplus later in the year. Santos and Yancoal each added 0.9 per cent, Ampol gained 0.5 per cent, and Woodside was flat. Boss Energy was one of the day’s strongest performers, surging 7.8 per cent.

The IT sector also offered some upside (up 0.3 per cent) tracking Wall Street’s Nasdaq index, which hit yet another all-time high on Friday. WiseTech gained 2.9 per cent and Life360 was up 1.7 per cent.

Financial stocks were mixed. Westpac was up 0.7 per cent and NAB rose by 0.6 per cent. Commonwealth Bank, which is the largest stock on the bourse, fell 0.6 per cent, as did ANZ Bank after it was revealed it had agreed to pay a $240 million penalty to settle four legal cases from the Australian Securities and Investments Commission, admitting to unconscionable conduct relating to a bond trading scandal, incorrect reporting of trading data and failures in how it dealt with borrowers in hardship.

Meanwhile, AMP shares surged 6.5 per cent to $1.80 after the financial services group announced an in principle $120 million class action settlement over excessive fees charged by three of its superannuation subsidiaries.

The consumer sectors strengthened. The big supermarkets both gained, with Woolworths and Coles up 0.4 per cent each. Bunnings owner Wesfarmers was up by 0.4 per cent and Aristocrat Leisure rallied 2.2 per cent.

The laggards

Healthcare stocks led the day’s losses, down 1 per cent as blood plasma giant CSL tumbled 1.8 per cent to $204.05, its lowest price since June 2019, after a grim earnings and outlook update. Pro Medicus (down 1.4 per cent), Resmed (down 1.4 per cent) and Fisher and Paykel Healthcare (down 1.1 per cent) were also in the red.

Large-cap miners were mixed, with Rio Tinto (down 0.1 per cent) and BHP (down 0.6 per cent) both lower. BHP faded to $40.58 after iron ore prices edged lower on weaker-than-expected industrial production figures from China, while retail sales growth in the world’s second-biggest economy also undershot forecasts. Fortescue (up 0.6 per cent) gained ground.

ASX-listed gold miners lost a little shine after last week’s rally, as investors took some profits on Evolution (down 5.3 per cent) – the day’s worst performer. Newmont (down 1.6 per cent) and Northern Star (down 1.9 per cent) also fell. Spot gold is trading hands at $US3636 ($5462) an ounce, coiling in a tight range just below last week’s record $US3673.96 high.

Qantas, which slipped 1 per cent to $11.30, goes ex-dividend on Tuesday, with Inghams, Cochlear, A2 Milk and South32 to follow later in the week.

The lowdown

The key question for investors this week is whether US Federal Reserve officials will push back against market bets on a series of interest-rate cuts extending into next year. In addition to the Fed’s decision on Wednesday, the Bank of Canada, the Bank of England and the Bank of Japan are also set to announce policy decisions this week.

“The week is going to be all about central bank decisions. Of course, the biggest one will be the Fed, which is all but certain to cut interest rates by 25 basis points,” wrote Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The question is how aggressive the Fed is with this easing, with the markets effectively pricing in a cut at each of the final three meetings of the year.”

While the broadly tipped 25 basis point cut from the Fed has hogged the headlines, local employment figures are also in focus.

“Australian jobs data on Thursday could also move markets,” Moomoo market strategist Michael McCarthy said.

“A stronger read might have economists moving away from local interest rate reductions regardless of any US moves, bringing a more cautious approach for local investors.”

US President Donald Trump has been putting pressure for months on Fed chair Jerome Powell to cut rates and repeatedly encouraged him to resign. On Sunday, Trump predicted a “big cut”.

“I think you have a big cut,” Trump told reporters on his way back to Washington. “It’s perfect for cutting.”

Gold held near a record as traders geared up for the anticipated easing and looked for clues on further rate cuts this year. Bullion has rallied nearly 40 per cent this year, with persistent uncertainty over geopolitics and Trump’s tariff agenda, and concerted central bank buying providing support.

“Macroeconomic numbers are likely to take over from tariff-related headlines,” ANZ Group Holdings’ Daniel Hynes and Soni Kumari said in a note, meaning that investors are watching how US tariffs will affect the nation’s economic growth and inflation data.

On Friday, Wall Street’s S&P 500 barely budged, edging down by less than 0.1 per cent from the all-time high it set the day before. The Dow Jones fell 273 points, or 0.6 per cent, while the Nasdaq composite added 0.4 per cent to its own record set on Thursday.

Wall Street stocks have rallied with expectations that the Federal Reserve will cut its main interest rate for the first time this year at its meeting this week. Such a move would give the economy a kickstart, and mortgage rates have already dropped in anticipation of it.

Expectations for a cut have built as recent reports suggested the US job market could settle into the precise balance that Wall Street has been betting on: slow enough to convince the Fed that it needs help, but not so weak that it will mean a recession, all while inflation doesn’t take off.

A lot is riding on whether that bet proves correct. Stocks have already soared on it. And if the Fed ends up cutting interest rates fewer times than traders expect, including three this year, the market could retreat in disappointment. That’s even if everything else goes right, and the economy does not fall into a recession and Trump’s tariffs don’t send inflation much higher.

Investors, “and I think the Fed, are convinced that we are not on the verge of a surge in inflation,” according to Scott Wren, senior global market strategist at Wells Fargo Investment Institute.

A survey from the University of Michigan on Friday suggested expectations for inflation may not be worsening among US consumers. Preliminary data suggested they’re bracing for inflation of 4.8 per cent in the upcoming year, the same as they were a month earlier.

Expectations for inflation over the longer term crept higher, though they’re still below where they were in April, when Trump announced his worldwide tariffs.

In the meantime, Wall Street continued to drift around its record heights.

RH fell 4.6 per cent after the furniture retailer reported profit and revenue for the latest quarter that came up short of analysts’ expectations. It also trimmed its forecast range for revenue this fiscal year amid what CEO Gary Friedman called “the polarising impact of tariff uncertainty and the worst housing market in almost 50 years”.

Oracle sank 5.1 per cent and was the single heaviest weight on the S&P 500 index. But that shaved only a bit off its surge from earlier in the week, when it soared to its best day since 1992 amid excitement about its winning multibillion-dollar contracts related to artificial-intelligence technology.

Another company that’s benefited from the AI frenzy, Super Micro Computer, rose 2.4 per cent after saying it had begun high-volume shipments of racks using Blackwell Ultra equipment from Nvidia that can be used for AI.

Microsoft climbed 1.8 per cent after European Union regulators accepted the tech giant’s proposed changes to its Teams platform, resolving a long-running antitrust investigation.

The European Commission said on Friday that Microsoft’s final commitments to unbundle Teams from its Office software suite, including further tweaks following a market test in May and June, are enough to satisfy competition concerns.

With AAP, AP, Bloomberg

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