ASX dragged lower by weaker retail and communications stocks

The Australian sharemarket lingered in negative territory on Tuesday, dragged lower by consumer discretionary and communications stocks, off the back of mixed trading on Wall Street.

The S&P/ASX 200 closed 24.6 points or 0.3 per cent lower to 8956.8 points.

Technology company Codan finished at the top of the bourse with gains of 4.9 per cent, followed by mining and metals company South32 (up 4.3 per cent). Vault Minerals finished 3.5 per cent higher.

At the bottom of the index was medical device company Polynovo, down 5.2 per cent, followed by coffee machine maker Breville Group (down 4.5 per cent) and Karoon Energy (down 3.7 per cent).

Consumer discretionary stocks pulled the index lower, declining 1.2 per cent as a sector. Wesfarmers shed 1.3 per cent and JB Hi-Fi dipped 1.5 per cent.

Communications services (down 1.1 per cent) also suffered: Telstra fell 0.6 per cent, while CAR Group shed 2.9 per cent. REA Group dropped 2.1 per cent.

Sharemarket operator ASX Ltd slumped 1.4 per cent on news that rival exchange operator Cboe Australia had received regulatory approval to conduct sharemarket listings in Australia.

Household sentiment declined for a second month by 3.5 per cent to 92.1 (down from 95.4 in September), according to Westpac/Melbourne Institute’s latest consumer sentiment index, giving up all the gains seen between May and August when consumers were buoyed by rate cuts.

“The October index read is now at firmly pessimistic levels, albeit still well above the very weak reads seen during the extended ‘cost-of-living’ crisis,” said Westpac head of Australian macro-forecasting Matthew Hassan.

“Consumers appear to have been rattled by recent updates on inflation … the latest weakening centred on more downbeat views on the near-term outlook, especially prospects for family finances.”

AMP economist My Bui said that while there are still some rate cuts to come, rates are “certainly close to the bottom”.

“The next rate decision in November will largely depend on the upcoming September quarter inflation reading, and we see a cut if the trimmed mean figure comes out between 2.6-2.7 per cent; though this is a very close call,” said Bui.

Mining giants were mixed; Rio Tinto gained 0.5 per cent, while BHP lifted 0.1 per cent. Fortescue fell 1.1 per cent.

The big four banks were also a mixed bag; Commonwealth Bank dipped 0.4 per cent, NAB fell 0.3 per cent, while Westpac finished flat. ANZ gained 0.5 per cent.

Pizza giant Domino’s announced in the late afternoon that it had appointed Dieter Haberl as the new chief executive of its Japan business, which has been struggling since the pandemic and recently shut 200 stores. As part of Domino’s broader strategy to “reduc[e] regional leadership structures”, Haberl’s appointment results in the departure of Asia CEO Josh Kilimnik and the vacant Europe CEO role will not be filled. Shares closed 0.3 per cent lower.

Om Monday, the US S&P 500 climbed 0.4 per cent to set an all-time high following mixed trading on Wall Street. The Dow Jones Industrial Average dipped 63 points, or 0.1 per cent, while the Nasdaq composite rose 0.7 per cent to its own record.

Advanced Micro Devices helped lead the way and soared 23.7 per cent after announcing a deal where OpenAI will use its chips to power AI infrastructure. As part of the deal, OpenAI could own up to 160 million shares of AMD if it hits certain milestones.

A frenzy around AI has been one of the main reasons Wall Street has been hitting record after record, though that’s also raising worries that prices have potentially shot too high. Much of the furor around AI in the last couple of weeks has come from OpenAI, which has quickly grown into a $US500 billion ($US756 billion) company. It’s been announcing deals with businesses around the world to develop more AI infrastructure.

Another chip company, Nvidia, announced a deal last month in which it would invest $US100 billion in OpenAI as part of a partnership, creating criticism that the AI investment pipeline was beginning to appear like a circle. Nvidia slipped 1.1 per cent following the AMD announcement. Because it’s the most valuable stock on Wall Street, Nvidia was the heaviest weight on the S&P 500.

Outside tech, Comerica jumped 13.7 per cent after Fifth Third Bancorp agreed to buy it in an all-stock deal valued at $US10.9 billion. The combination would create the country’s ninth-largest bank. Fifth Third’s stock fell 1.4 per cent.

Tesla rose 5.4 per cent after social media postings by the electric-vehicle maker hinted at a possible product unveiling coming this week.

Verizon Communications fell 5.1 per cent after the telecom replaced its chief executive. Dan Schulman, a director at the company and former chief executive of PayPal, is taking over for Hans Vestberg.

Elsewhere on Wall Street, trading was relatively quiet as the sharemarket continues to largely ignore the US government’s shutdown. Past closures of the federal government have had minimal effect on the stock market or on the economy, and the bet on Wall Street is that something similar will happen again.

All told, the S&P 500 rose 24.49 points to 6740.28. The Dow Jones Industrial Average fell 63.31 to 46,694.97, and the Nasdaq composite rose 161.16 to 22,941.67.

Politics are playing a bigger role in sharemarkets abroad, as Japanese stocks soared and French stocks slumped following their latest political shake-ups.

Japan’s Nikkei 225 jumped 4.8 per cent after the country’s Liberal Democratic Party chose Sanae Takaichi as its leader. She was an ally of the late prime minister Shinzo Abe, who pushed for lower interest rates and other policies that investors liked.

The yen’s value dropped against the US dollar on expectations that Takaichi will boost spending, which is likely to add to inflationary pressures. That in turn helped push up stocks of Japanese exporters, whose products can become more attractive on the global market when the yen is cheaper.

“Obviously, investors like what she has been saying and certainly today judging by the number of stocks that moved and which stocks moved, it seems like pretty much led by foreigners so far,” Neil Newman, head of strategy at Astris Advisory Japan, said about Takaichi.

In Paris, the CAC 40 index slumped 1.4 per cent following the resignation of France’s new prime minister.

Sébastien Lecornu resigned a day after he named his government, drawing a backlash across the political spectrum for his choice of ministers. French politics have been in disarray since President Emmanuel Macron called snap elections last year that produced a deeply fragmented legislature.

In the bond market, the yield on the 10-year Treasury rose to 4.16 per cent from 4.13 per cent late Friday.

The shutdown of the US government is likely to mean delays for US economic reports scheduled for this week, though investors will have some earnings reports to comb through, including from Delta Air Lines, PepsiCo and Levi Strauss.

Despite the shutdown, the Federal Reserve will release minutes from its meeting last month, when it cut its benchmark interest rate for the first time this year. Much on Wall Street is riding on expectations that the Fed will continue cutting interest rates through this year and into next.

With AP

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