Market falls as yield surge, oil price hit, gold miners shine

It was another weak day for the local market with every major sector falling on Tuesday and dragging the S&P/ASX200 down another 0.4 per cent.

The primary driver remains the oil price, which fell by 4 per cent, and the surging bond yields impacting valuations.

This trend has benefitted the gold mining sector which contributed to a flat performance from the materials sector as Regis (ASX: RRL), St Barbara (ASX: SBM) and Evolution (ASX: EVM) delivered gains of 4.7, 2.8 and 2.5 per cent respectively.

The utilities sector also outperformed on strong energy prices with AGL (ASX: AGL) gaining 2 per cent during the session.

Pendal (ASX: PDL) shares were broadly flat after management rebuffs the unexpected takeover offer from giant Perpetual (ASX: PPT), suggesting it ‘significantly undervalues’ the company.

They responded by announcing a $100 million on-market buyback in an effort to support the share price whilst reporting another $1.6 billion in outflows from their funds taking total assets to $125.7 billion in March.

Healthcare was the biggest detractor, with the likes of Resmed (ASX: RMD) dragging the sector down 1.4 per cent.
 
City Chic smashed, lithium on the nose, Iress reverses course
 
Shares in customer relationship management service and data provider Iress (ASX: IRE) gained 1.7 per cent, outperforming the market.

The rally came after management announced they had cancelled the divestment of their UK mortgage servicing business which contributed just GBP$6.4 million in net profit in 2021.

The news comes after the reversed takeover offer in 2021.

Childcare operator G8 Education (ASX: MGEM) fell 2.3 per cent after management flagged falling revenue on the back of a surge in Omicron cases, and impacts from floods and labour shortages.

Occupancy is 2.1 per cent behind lower 2021 levels, with the result of a significant drop in earnings from $17 million to just $1 million for the half.

But all eyes were on the lithium sector which saw a massive selloff despite strong reports from Pilbara (ASX: PLS) and a number of other major players.

Pilbara fell 5.8 per cent, Novonix (ASX: NVX) 5.5 and Lion Town (ASX: LTR) 5.3 per cent.

The selling pressure came after Pilbara reported quarterly production in the middle of their previous guidance but flagged issues with staffing and port delays.

Lynas Corp (ASX: LYC) also reported, delivering a record quarter with sales revenue of $327.2 million, a 60 per cent increase on the back of surging commodity prices.
 
Inflation jumps but positive signs emerge, yields and shares fall, earnings season to begin
 
It was another negative day for US sharemarkets with all three benchmarks finishing 0.3 per cent lower after another record inflation print.

According to reports US consumer inflation rose 1.2 per cent in March taking the annual rate to 8.5 per cent the highest since 1982.

But there were positive signs in the core print which excludes more volatile items, which finished ‘just’ 6.5 per cent higher with many now suggesting a peak may have been reached.

That is what the yield curve suggests at least after bond yield retreated on the news.

The major banks including JP Morgan (NYSE: JPM) all fell by more than 1 per cent ahead of the beginning of an incredibly important but likely volatile reporting season.

Looking more closely at the inflation data and positive signs emerge, with a used car and some other goods seeing price falls, but new car prices continuing to rise.

Goods inflation rose 8.1 per cent whilst household furnishing gained just 1 per cent due primarily to the high comparables in the prior month.

In positive signs, President Biden continues to seek alternative sources of fuel, releasing higher ethanol products in an attempt to dampen prices.

Drew Meredith

Drew is publisher of the Inside Network's mastheads and a principal adviser at Wattle Partners.