By Carla Jaeger
Welcome to your five-minute recap of the trading day and how the experts saw it.
The numbers: The Australian sharemarket suffered a hefty fall on Friday as investors fretted over the consistently hawkish tone of US Federal Reserve officials and the market turmoil in Europe.
The ASX200 deepened its losses over the day, finishing down 1.23 per cent, or 80.8 points, to 6474.20, after US stocks hit their lowest point since November 2020 overnight.
Investors are grappling with threats posed by discordant moves from central banks over the past few days.Credit: AP
The lifters: With nine of the 11 sectors slipping into negative territory, the materials and energy sectors managed to keep their head above water - closing up 0.67 per cent and 0.07 per cent respectively. Market heavyweight BHP jumped 0.92 per cent; Rio Tinto gained 2.73 per cent; and Fortescue Metals lifted 0.24 per cent.
Other lifters included Meridian Energy 5.19 per cent; Northern Star Resources added 4.54 per cent; and engineering company Worley gained 1.03 per cent.
The laggers: Tech and bank stocks dragged down the index. WiseTech dropped 5.59 per cent while accounting software Xero slipped 4.53 per cent. The banks also took a pasting, with CBA down 2.6 per cent, NAB slipping 1.5 per cent, Westpac slumping 2.3 per cent and ANZ down 2.4 per cent.
Elsewhere, health imaging IT provider Pro Medicus’ stocks slipped 5.59 per cent; hearing aid manufacturer Cochlear fell 6.7 per cent; while CarSales.com dropped 7.79 per cent.
The lowdown: After riding the high of Bank of England’s bond buy-back rescue, global sharemarkets have slipped once again, as the season of market volatility continues.
Rallying mining stocks have managed to hold the Australian sharemarket from suffering the same fate as Wall Street, supported by healthy commodity prices.
“For now, it’s definitely a risk off trade for investors as they pretty much look to insulate themselves from the craziness outside,” independent analyst Elio D’Amato said. “That’s exemplified by the fact that materials was our best sector today, as one of the sectors that benefits from a strong US dollar - whereas every other sector was in the red light.”
Today’s drop wiped out any gains the local index made for the week, which comes as economists expect the Reserve Bank to lift the cash rate by a further 50 basis points next Tuesday, to 2.60 per cent.
“Global interest rates have risen further and the cash rate is still below the RBA’s estimate of neutral,” Chief economist at Westpac, Bill Evans, said on Friday.
In other news, both personal and business loans grew in August, marking the fastest pace of credit growth in around 14 years. Private sector credit rose by 0.8 per cent in August, growing by 9.3 per cent over the year, while business credit rose 1.2 per cent, up 14.1 per cent over the year.
Commsec senior economist Ryan Felsman says that both businesses and households increased their borrowings due to “expansionary policy settings during the pandemic.”
“The rapid interest rate hikes and higher borrowing costs have begun to weigh on home lending and prices, slowing housing demand. The full effect of the rate hikes on housing credit will become clearer at the end of this year and early 2023,” Felsman said.
Meanwhile, as BHP’s stock rises, Macquarie analysts are continuing to back the market heavyweight to outperform on the local bourse, preferring it over its competitors Rio Tinto and Fortescue Metals.
“BHP is the only major with a positive return to date on the ASX and has outperformed the ASX200 index and iron ore prices largely driven by its coal exposure and portfolio activity within the year,” a spokesperson from Macquarie Bank said.
Overnight, the S&P 500 fell as much as 2.9 per cent during Thursday’s session but trimmed its losses as markets closed. The decline wiped out its ill-timed attempt on Wednesday to rebound from a six-day slide.
Tweet of the day:
Quote of the day: “We need to have them appreciate very, very firmly that Australians’ personal information belongs to Australians,” Mark Dreyfus said, as the Attorney-General said he wanted to overhaul Australia’s privacy laws, to ensure companies retain only essential personal information.
You may have missed: Commonwealth Bank will have more excess capital, after the regulator removed a penalty because it was satisfied the bank had implemented a long-running program to improve its governance.
CBA was forced to carry an extra $1 billion in capital in 2018 following a string of scandals at the bank, and on Friday the regulator removed CBA’s final $500 million “operational risk capital overlay.
“We are committed to ensuring the improvements we’ve made to our governance, culture and risk management practices are continuously improved and sustained,” CBA chief executive Matt Comyn said.
With Clancy Yates
Bloomberg
The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.