Gold miners, supermarkets and bank stocks helped steer the market higher as trading turned defensive following further signs of a US economic slowdown.
The S&P/ASX 200 rallied 44 points or 0.62 percent by mid-session. A sharp retreat in tech stocks was outweighed by solid gains in lenders and traditional havens.
What’s driving the market
The Australian market moved back into positive territory for the week as investors found the positives in a mixed finish on Wall Street. A slim win for the Dow handed Australian traders a blueprint for today, even as the Nasdaq Composite hit the skids.
The Dow overcame early weakness, edging up 0.15 percent as a decline in treasury yields encouraged rotation into stocks with similar properties to bonds. Yields fell as private-sector business growth decelerated and home sales declined, sharpening worries about an economic slowdown as the Federal Reserve raises rates.
The Nasdaq Composite sat out the intraday recovery, shedding 2.35 percent as a revenue warning from Snap weighed on ad-dependent online businesses. The S&P 500 lost 0.81 percent.
“Investors fled social media stocks on fears that the deteriorating macroeconomic environment could extend far beyond Snap,” Kunal Sawhney, chief executive at research group Kalkine, said.
“Market sentiment was also battered by the latest findings from the S&P flash surveys, which fell to their lowest level in many months in May. The pair of surveys tracking manufacturing and services sectors showed a slowdown in the US economic growth in May owing to inflation and weaker demand,” he added
A mostly risk-averse Australian session saw tech and small caps decline while blue-chips rose. Bond proxies drew a bid as the yield on ten-year Australian government bonds dropped almost 10 basis points to the lowest this month.
The shockwaves from last week’s dire outlooks from US retail giants Walmart and Target began to settle. Woolworths bounced 1.54 percent. Coles put on 1.53 per cent. IGA operator Metcash added 2 percent.
Going up
Market heavyweights provided today’s momentum. The S&P/ASX 20 climbed 1.2 percent, twice as much as the broader ASX 200. The Small Ordinaries declined 0.46 percent.
The big four banks put on between 1.2 and 2.5 percent. Rio Tinto gained 2.34 percent. Wesfarmers firmed 1.27 percent, Telstra 1.16 percent and Goodman 0.51 percent.
The gold sub-sector shone as the hunt for havens from inflation and stock market volatility lifted the yellow metal for a fourth session. Evolution Mining firmed 4.07 percent, Perseus 4.93 percent and St Barbara 3.69 percent. Sector giant Newcrest gained 1.26 percent.
A contract win lifted Worley 2.31 percent. The engineering group was awarded a services contract for a renewable diesel plant in Nebraska. Heartwell Renewables intends to produce 302 million litres of diesel per year from vegetable oils and tallow.
Woodside edged up 0.03 percent as it commenced trade under a new name and ticker code following its merger with BHP’s petroleum business. The business trades from today under the name Woodside Energy Group and code WDS. BHP shareholders received shares in the new entity.
Nanosonics rose 1.45 percent after confirming full-year revenues were expected to be in line with market expectations.
Testing and certification business ALS reported a strong start to the financial year following a 42.1 percent lift in full-year profit in FY22. Volumes continued to grow across the firm’s Life Sciences and Commodities divisions. The share price rose 2.29 percent.
Going down
Bloodletting on the Nasdaq drove the domestic tech sector down 2.6 percent. Afterpay owner Block dropped 5.38 percent. Appen gave up 4.02 percent, Megaport 4.07 percent and Novonix 4.34 percent.
Tabcorp continued to lose altitude after spinning out its lotteries business, falling 6.4 percent.
Kiwi medical device manufacturer Fisher & Paykel dropped 0.21 percent towards a 30-month low as the launch of new products failed to offset uncertainty about the coming year. The company unveiled three new products, but declined to offer full-year revenue guidance. Net profit declined 28 percent in FY2022.
A broker downgrade from JPMorgan helped pull Challenger down 3.05 percent following yesterday’s Investor Day. UBS raised its rating to ‘Buy’ at the same time JPMorgan lowered its rating to ‘Underweight’.
Other markets
A cautious morning on Asian markets saw the Asia Dow edge up 0.25 percent, China’s Shanghai Composite 0.34 percent and Hong Kong’s Hang Seng 0.05 percent. Japan’s Nikkei dropped 0.1 percent.
S&P 500 futures climbed 15.5 points or 0.4 percent.
Oil gained momentum as risk appetite improved. Brent crude rallied US$1.05 or 0.95 percent to US$111.73 a barrel.
Gold trimmed four days of gains, easing US$5.20 or 0.3 percent to US$1,860.20 an ounce.
The dollar continued to trade either side of 71 US cents, dipping 0.18 percent this morning to 70.88 US cents.
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