Market fails to bite on solid economic data

Local shares followed Wall Street lower on Wednesday, despite the release of data showing that the Australian economy grew by 0.6 per cent in the September quarter, for an annual growth rate of 5.9 per cent, a strong result coming off the back of the final wave of COVID-19 lockdowns in 2021. The quarterly figure was slightly below market consensus, which expected about 0.7 per cent, but was on par with the Reserve Bank of Australia’s most recent forecasts.
 
If anything, the market is worried about whether the Reserve Bank can keep raising rates in the face of rising recession risks. The short end of Australia’s yield curve has inverted for the first time in 21 months, showing these doubts. The yield on the benchmark three-year government note dropped below the cash rate this week for the first time since March 2021 as the RBA lifted the official rate by one-quarter of a percentage point, to 3.1 per cent. The three-year yield is at 3.016 per cent.
 
The share market’s benchmark S&P/ASX200 fell 61.9 points, or 0.9 per cent, to 7229.4 on Wednesday, the gauge’s worst loss since November 3. The broader All Ordinaries gave up 64.5 points, also 0.9 per cent, to 7423.2.
 
Every sector except materials retreated, with tech the hardest hit, dropping 3.3 per cent. Global logistics software player WiseTech Global led the tech names lower, falling $3.00, or 5.3 per cent, to $53.17; while small-business accounting software star Xero slipped $3.02, or 4.2 per cent, to $68.80; and electronic design automation software leader Altium lost $2.11, or 5.5 per cent, to $36.50.
 
All the big banks lost ground, with Westpac sliding 18 cents, or 0.8 per cent, to $23.57; ANZ losing 35 cents, or 1.4 per cent, to $24.03; National Australia Bank retreating 38 cents, or 1.2 per cent, to $30.65; and Commonwealth Bank closing down 89 cents, or 0.8 per cent, to $105.55. Investment bank Macquarie Group eased $3.10, or 1.8 per cent, to $173.64.
 
Insurance companies were bid higher, however, with IAG gaining 9 cents, or 1.9 per cent, to $4.86; QBE adding 25 cents, or 1.9 per cent, to $13.24; Suncorp advancing 17 cents, or 1.5 per cent, to $11.84; and health insurer NIB rising 17 cents, or 2.4 per cent, to $7.23.
 
Elsewhere in industrials, Telstra was down 2 cents to $4.01; CSL down $1.60, or 0.5 per cent, to $299.19; Woolworths lost 60 cents, or 1.7 per cent, to $34.17; Coles was down 15 cents, or 0.9 per cent, to $16.75; Afterpay owner Block, Inc. retreated $2.35, or 2.5 per cent, to $92.55; and Brambles slid 17 cents, or 1.4 per cent, to $11.96.
 
Chinese numbers no big deal for miners
 
China’s imports and exports shrank in November as global demand weakened and anti-COVID controls weighed on the second-largest economy. Exports declined 9 per cent from a year earlier to $US296.1 billion, worsening from October’s 0.9 per cent decline, while imports fell 10.9 per cent to $US226.2 billion, down from the previous month’s 0.7 per cent fall.
 
The data did not appear to dent renewed optimism among mining investors about China’s reopening. Iron ore heavyweight Fortescue Metals rose 47 cents, or 2.3 per cent, to a six-month high of $21.17, while BHP advanced 4 cents to $46.66. But Rio Tinto lost 56 cents, or 0.5 per cent, to $115.50.
 
Mineral Resources, which mines iron ore and lithium, added 66 cents, or 0.7 per cent, to $90.06. IGO, which mines nickel and lithium, gained 11 cents, or 0.7 per cent, to $15.53. Copper producer Sandfire was up 4 cents, or 0.7 per cent, to $5.44.
 
The coal stocks were mixed, with Whitehaven Coal down 11 cents, or 1.1 per cent, to $9.70, but New Hope Corporation advanced 2 cents, or 0.4 per cent, to $5.79, Coronado Global Resources was up 6 cents, or 3 per cent, to $2.06, and Yancoal Australia moved 23 cents, or 4.1 per cent, higher to $5.87.
 
In lithium, producer Allkem was down 20 cents, or 1.4 per cent, to $13.80; fellow producer Pilbara Minerals gained 10 cents, or 2.2 per cent, to $4.71; but project developer Piedmont Lithium was down 2 cents, or 2.4 per cent, to 82 cents, and fellow developer Liontown Resources was off 3 cents, or 1.5 per cent, to $1.94.
 
The sector gained a new stock with Patriot Battery Metals more than doubling on its ASX debut, finishing at $1.275 after raising $4.2 million in an initial public offering at 60 cents a share. The junior explorer’s flagship asset is a lithium tenements in Quebec but what really attracted attention was that it has former Pilbara Minerals CEO Ken Brinsden as its non-executive chairman.
 
In the energy sector, Woodside dipped 75 cents, or 2 per cent, to $36, and Santos fell 8 cents, or 1.1 per cent, to $7.17 despite announcing the start of another $US350 million ($A522m) share buyback. But Beach Energy lost a further 18 cents, or 9.9 per cent, to $1.64 and is now down 13.7 per cent this week in the wake of the collapse of Perth builder Clough, which was contracted for engineering and construction work at Beach Energy’s Waitsia Stage 2 project in the Perth Basin.
 
Quiet night on US markets
 
In the US overnight, the broad S&P 500 index eased 7.3 points to 3,933.9, while the 30-stock Dow Jones Industrial Average added 1.6 points to 33,597.9 and the technology-heavy Nasdaq Composite Index slid 56.3 points, or 0.5 per cent, to 10,958.6. The US 10-year Treasury yield eased nine basis points (0.09 per cent) to 3.42 per cent, while the more policy-sensitive 2-year yield also moved lower, to 4.266 per cent. In commodities, the global benchmark Brent crude shed US$1.94, or 2.4 per cent, to US$77.41 a barrel, while West Texas Intermediate lost US$1.92, or 2.6 per cent, to US$72.33 a barrel. The oil market is still digesting the US$60-per-barrel price limit on seaborne Russian crude imposed by G7 democracies and Australia on Monday.
 
Gold is up US$14.76, or 0.8 per cent, to US$1,785.92 an ounce, while the Australian dollar is buying 67.23 US cents this morning.

Drew Meredith

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