“The RBA easing cycle is likely over,” said Su-Lin Ong, chief economist at Royal Bank of Canada. The Commonwealth Bank’s Belinda Allen concurred, citing “the broad-based nature of pricing pressures” revealed in the data. Bank of America Securities also sees an end to rate cuts for now, as does JPMorgan Chase.
Banking stocks led declines on the ASX after the report. CBA, the nation’s biggest stock, dropped 2.1 per cent, National Australia Bank fell 2.6 per cent, Westpac slumped 3.4 per cent and ANZ Bank slipped 0.4 per cent. “Millionaires’ Factory” Macquarie dropped 1.4 per cent.
Continued higher rates keep borrowing costs elevated for businesses and consumers, which is likely to keep a lid on their spending.
Wesfarmers, the nation’s largest discretionary retailer with its Kmart, Officeworks and Bunnings chains, fell 1.7 per cent, while electronics chain JB Hi-Fi shed 1.3 per cent. Qantas lost 3.2 per cent, and Virgin Australia fell 2.1 per cent. Shopping centre owners Scentre (down 1.2 per cent), Stockland (down 3.9 per cent) and Vicinity (down 1.9 per cent) sent property stocks lower.
Bucking the negative sentiment, Woolworths shares climbed 2.4 per cent even after the supermarket giant reported weaker-than-expected sales figures for the September quarter. Chief executive Amanda Bardwell said the company’s performance “was below our aspirations” as food sales at its supermarkets rose 2.2 per cent in the quarter, falling short of analyst forecasts.
However, “there appear to be some (very early) green shoots”, Jarden analyst Ben Gilbert wrote in a note to clients, pointing to the supermarket’s October food sales of 3.2 per cent. If the September quarter “proves to be the trough and October to-date trends continue, the stock should do well”.
Loading
Pressure is rising on the Woolworths CEO, who will face shareholders at the company’s annual general meeting on Thursday, just as arch-rival Coles reports its quarterly sales. Coles has been gaining market share on Woolworths, but its shares dropped 1.9 per cent.
Tech shares also declined, let by accounting software maker Xero – now the biggest tech stock on the ASX – software firm Technology One and data centre provider NextDC. They fell 2 per cent, 3.6 per cent and 1.9 per cent, respectively. Embattled WiseTech Global – which lost its status as the nation’s biggest tech firm in a 15.9 per cent share rout on Tuesday after revealing its offices had been raided by federal police and market regulators over share trades by executive chair Richard White – bounced back up by 1 per cent.
CSL continued its slide, losing a further 4 per cent. The biotech giant slumped 15.9 per cent on Tuesday after vaccine scepticism led to a plunge in influenza vaccinations in the US, a key market, forcing it to issue a profit warning for its Seqirus vaccine business and delaying the unit’s planned spin-off into a separate company.
On the bright side, mining heavyweights BHP, Fortescue and Rio Tinto advanced 1.3 per cent, 1 per cent and 0.5 per cent respectively, while gold miners got some reprieve after their recent losses. Northern Star climbed 2.4 per cent, as did Evolution Mining, and Newmont was up 1.1 per cent as gold steadied after a three-day rout to trade near $US3950 an ounce.
Loading
On Wall Street overnight, the S&P 500 added 0.2 per cent. The Dow Jones rose 0.3 per cent, and the Nasdaq composite climbed 0.8 per cent. All three indexes set all-time highs for a third straight day.
Moves were also relatively modest in the bond market as US investors wait for a few events that could shake things up. On Wednesday, the Federal Reserve will announce its latest rate move, while some of the US bourse’s most influential companies will report how much profit they made during the summer. On Thursday, US President Donald Trump will meet China’s leader Xi Jinping in hopes of smoothing tensions between the world’s two largest economies.
Tech giants Apple (up 0.1 per cent) and Microsoft (up 2 per cent) both climbed, with both companies hitting a valuation of $US4 trillion during the session, joining AI giant Nvidia as the only publicly traded companies worth that figure. Microsoft hit the mark earlier in the year.
“We expect another strong round of megacap tech earnings reports, given the relentless demand for AI technology and infrastructure,” said Clark Bellin at Bellwether Wealth. “While profitability in AI remains an unknown, investors for now are willing to overlook this as the AI arms race heats up.”
Amazon, meanwhile, rose 1 per cent after saying it will cut about 14,000 corporate jobs, or about 4 per cent of its corporate workforce, as it ramps up spending on artificial intelligence while cutting costs elsewhere.
United Parcel Service rallied 8 per cent after delivering stronger profit and revenue for the latest quarter than analysts expected. UPS also gave a forecast for revenue in the all-important holiday shipping season that was slightly above analysts’ expectations.
On the losing end of Wall Street was Royal Caribbean, which lost 8.5 per cent despite reporting a stronger profit than analysts expected. Its revenue for the latest quarter fell short of expectations. The cruise operator also said it’s seen a “minimal” hit to its business this quarter because of bad weather, along with the temporary closure of one of its exclusive destinations in Haiti.
A slowing job market is one of the main reasons Wall Street expects the Fed to announce another cut to interest rates on Wednesday. It would be the second time this year that it’s lowered the federal funds rate in hopes of helping the job market.
Loading
The widespread expectation is that the Fed will also cut rates for a third time at its final meeting of the year. A lot is riding on that, in part because US stock prices have already rallied to records on expectations for it. That means the most important part of Wednesday’s announcement for Wall Street will be whether Fed Chair Jerome Powell gives any hints about upcoming moves.
Fed officials have indicated that they’re likely to keep cutting rates next year, but they may have to change course if inflation accelerates beyond its still-high level as low interest rates can make inflation worse.
with AP, Bloomberg
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.
