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Higher-than-expected US retail spending hits Australia.
The S&P/ASX 200 Index plummeted -1.5 percent on Wednesday, reaching its lowest point in a month as all 11 sectors fell off the back of stronger US retail spending, and weak Chinese data. Stronger-than-expected retail spending from the US heightened concerns that the Federal Reserve may need to sustain higher interest rates to control inflation. US retail spending, harmed the Australian Technology sector, due to its sensitivity to interest rate changes. Local firm WiseTech Global experienced a decline of -3.7 percent, Xero saw a decrease of -2.6 percent, and NEXTDC suffered a -2 percent drop.
Chinese data disappoints, hurting our miners.
Investors also expressed concerns due to additional disappointing data out of China, revealing a decrease in new home prices last month. This data served as further proof of a worsening property sector, responsible for approximately 40 percent of China’s steel demand. BHP, constituting about 10 percent of the ASX, saw a decrease of -3.4 percent, Fortescue Metals experienced a -3 percent drop, while Rio Tinto slid by -2.3 percent. The financial sector also experienced declines, led by Commonwealth Bank whose shares traded ex-dividend, resulting in a -3.6 percent drop. Across the board, the big four Australian banks witnessed a decrease of less than 1 percent. A series of property companies also disclosed their results, with Dexus experiencing a -3.1 percent decrease as it transitioned to a full-year net loss of $752.7 million, primarily due to significant write-downs on its portfolio. Meanwhile, Vicinity Centres saw a +2.4 percent increase attributed to higher rental income and increased visitation figures – despite issuing a cautionary note about a challenging first half. Mirvac managed to surge by +5.3 percent, defying warnings of further earnings declines. The property developer reported a nearly one-third drop in revenue for fiscal 2023.
More rate rises are expected in the US.
The Dow Jones fell -1.02 percent, S&P 500 fell -1.16 percent, and the Nasdaq dropped -1.14 percent, as markets brace for further tightening of monetary policy to counter inflation, following hawkish FED rhetoric and heightened retail spending figures. Home Depot Inc rose on Wednesday up +0.7 percent, as second quarterly earnings surpassed many analysts’ expectations – highlighting the resilience of the US consumer. Some economists have displayed heightened apprehension about the possibility of an “economic downturn”, stating more needs to be done to dampen consumer behaviour. Fitch Ratings also continued to apply pressure, warning that it may downgrade ratings of more than a dozen U.S banks, consequently, shares of banking behemoths like JPMorgan Chase & Co, Bank of America Corp and Wells Fargo & Co all tumbled 2.6%, 3.2% and 2.3% for the day.
