ASX slips as rate cut hopes fade; Wesfarmers, Coles and Lynas fall

The Australian sharemarket has finished down for the third session in a row, with retailers, tech and property stocks weighing on the bourse as investors gave up hopes of further interest rate cuts this year after Wednesday’s shock inflation data.

The S&P/ASX 200 dropped 40.7 points, or 0.5 per cent, to 8885.50 on Thursday, extending the week’s losses after the local bourse fell 1 per cent in the previous session. Seven of the market’s 11 industry sectors declined, with energy and healthcare stocks notable exceptions. The Australian dollar rose 0.3 per cent to US65.92¢ at 4.55pm AEDT.

The chances of an interest rate cut by Christmas have all but disappeared after inflation jumped to its highest level in more than a year with signs that price pressures are broadening across the entire economy. The Australian Bureau of Statistics revealed on Wednesday that inflation jumped by 1.3 per cent in the September quarter, taking the annual rate to 3.2 per cent.

“It pretty much eradicates almost any chance of a rate cut before the end of the year, it would take something extraordinary to see it now,” said Capital.com market analyst Kyle Rodda.

Continued higher rates keep borrowing costs elevated for businesses and consumers, which is likely to keep a lid on their spending. Not surprisingly, discretionary-spending dependent stocks such as retailers led declines on Thursday.

Wesfarmers – the owner of the Bunnings, Kmart and Officeworks chains – slumped 7.1 per cent after it told shareholders at its annual general meeting that “cost-of-living pressures remain a challenge for some households and consumers maintain a cautious outlook”.

JB Hi-Fi fell 4.5 per cent. The electronics retailer said in a trading update that comparable sales at its Australian stores grew 5 per cent in the September quarter, unchanged from last year’s. Rebel sports stores owner Super Retail Group was down 2.6 per cent and fashion retailer Premier Investments fell 2 per cent.

Shopping centre landlords Scentre (the owner of the Westfield malls), Stockland and Vicinity sent property stocks lower, with falls of 2.9 per cent, 3.4 per cent and 2.7 per cent, respectively. Property developer Mirvac slumped 3.8 per cent.

Coles shares fell 2.6 per cent even after saying its supermarket sales rose 4.6 per cent in the latest quarter, more than double the rate of its bigger rival Woolworths, and continued at a similar rate of growth in October. Woolworths shares rose a further 3.3 per cent after it said on Wednesday its sales grew 3.2 per cent in October, sparking hopes of a recovery from its loss in market share.

Tech companies also lost ground, with software makers Xero and Technology One down 2.9 per cent and 0.8 per cent, respectively, while embattled tech concern WiseTech Global lost 2.6 per cent.

James Hardie slumped 3.1 per cent after investors dumped chairwoman Anne Lloyd and two other board members in an unprecedented display of anger over the board’s disastrous $14 billion acquisition of US group Azek and the subversion of investor rights. The building materials maker’s annual general meeting concluded in 17 minutes, with the company offering no apology to investors for the board’s actions.

Lynas Rare Earths dropped 3.2 per cent after US President Donald Trump and China’s Xi Jinping wrapped up their highly anticipated summit in the afternoon, concluding talks they hoped would quell an expansive trade fight that has shaken global markets and sparked a scramble to secure non-China-dependent supplies of critical minerals.

As the only producer of so-called heavy rare earths outside China, Lynas plays a critical role in that scramble.

Trump confirmed after the meeting with Xi that China would postpone its strict new controls on rare-earths metals.

Among Thursday’s market winners, biotech giant CSL led the healthcare sector higher with a 5.2 per cent rebound. The stock had plummeted over the past two sessions after vaccine scepticism led to a plunge in influenza vaccinations in the US, forcing CSL to issue a profit warning for its Seqirus vaccine business and delaying the unit’s planned spin-off into a separate company.

Energy stocks also advanced after oil bumped higher overnight, snapping a three-day losing streak, as investors assessed a large drop in US inventories and the impact of Western sanctions against leading Russian crude producers. Oil and gas major Woodside rose 1.4 per cent and its smaller rival Santos added 0.6 per cent.

On Wall Street overnight, US stocks were hovering around fresh records overnight after the Federal Reserve, as expected, cut its key interest rate. AI giant Nvidia surged 2.4 per cent to become the first company valued at $US5 trillion ($7.6 trillion) on the US sharemarket, just three months after the AI darling was the first to break through the $US4 trillion barrier.

The S&P 500 lost 0.4 per cent, the Dow Jones slipped 0.3 per cent and the Nasdaq composite was 0.1 per cent lower. All three indexes were coming off their latest all-time high. Markets have retreated after the head of the Federal Reserve warned that more cuts to interest rates, which Wall Street has been banking on, are not guaranteed.

Stocks erased what had been modest gains after chairman Jerome Powell warned that it “is not a foregone conclusion” that the Fed will cut its main interest rate again at its next meeting in December; “far from it”.

“That needs to be taken off the board,” Powell said.

His comments came about a half hour after the Fed announced its second cut of the year to its main interest rate, in hopes of helping a slowing job market.

Powell’s warning hit Wall Street because many traders had seen it as a near certainty that the Fed would cut in December, along with potentially more in 2026, and they had already driven stock prices to records in part because of it. Powell said officials had “strongly differing views about how to proceed in December”.

Even Wednesday’s decision to cut, which was seen as a slam dunk, came with less authority than expected. One member of the Fed’s committee, Jeffrey Schmid, voted to keep the federal funds rate steady instead of lowering it.

With AP, Bloomberg, AAP

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