Staff writers
Updated ,first published
The Australian sharemarket slid lower on Wednesday despite the nation’s biggest lender posting a strong profit as declines in bank stocks and supermarket chains weighed on the index.
The local market followed Wall Street which fell further from its records, with oil prices swinging on uncertainty about when the war with Iran will allow crude to flow freely again.
The S&P/ASX 200 finished trade down 41.20 points, or 0.45 per cent, at 9209.40, with nine of its 11 sectors in the red. It added 0.2 per cent on Tuesday. The Australian dollar was trading at US70.58¢.
Commonwealth Bank, the nation’s biggest lender and the second-biggest stock on the ASX, whipsawed after it posted a strong profit but warned economic growth was slowing due to higher interest rates and inflation.
CBA’s shares closed down 0.69 per cent, having dropped as much as 2.2 per cent just after the market opened and then rebounded for a brief 1.5 per cent gain. The banking giant notched up $11 billion in full-year cash profit, up 7 per cent, fuelled by growth across its vast loan and deposit portfolios, but flagged tougher times ahead.
Despite strong growth in the year to June, CBA said new applications for mortgages had fallen 15 per cent since the May budget, as the housing market slows due to higher interest rates and a tightening in tax concessions for property investors. The bank also said costs from soured loans had increased due to cost-of-living pressures and increased economic uncertainty.
“Growth is slowing, with higher interest rates and inflation placing uneven pressure on household incomes and economic activity,” CBA boss Matt Comyn said. “Housing activity has softened from a high base.”
The other big four banks also finished the day lower, with National Australia Bank down 0.85 per cent, Westpac down 0.9 per cent and ANZ Bank down 0.6 per cent.
The mining heavyweights weighed on the market, too, with iron ore and copper powerhouses BHP, Rio Tinto and Fortescue down 0.75 per cent, 0.24 per cent and 0.33 per cent, respectively. Gold miners fared better, though, with Northern Star Resources up 0.66 per cent and Evolution Mining up 0.14 per cent. Gold steadied near $US4370 an ounce as traders awaited US inflation data that could provide fresh clues to the Federal Reserve’s interest-rate path.
Seek shares plummeted 14.31 per cent after the company reported a full-year net loss of $307 million, with its earnings wiped out by losses from investments in its Seek Growth Fund and write-downs against its investment in Chinese online recruitment and career development platform Zhaopin.
Solly Lew’s Premier Investments fell 11.01 per cent after the fashion retailer said its sales were down 2 per cent in the year just ended to $795.5 million, and slightly trimmed its underlying earnings forecast to $176 million. The company said it will close its three Peter Alexander stores in the UK, citing difficult trading conditions and the negative outlook for the British economy.
Energy stocks were among the few green sectors in a sea of red, as power company AGL jumped 5.95 per cent after saying its full-year net profit jumped 575 per cent to $756 million, boosted by the divestment of Tilt Renewables and the reevaluation of bad contracts. Its underlying net profit dipped 1.7 per cent to $631 million, which was in line with market expectations. Origin Energy also gained, up 2.93 per cent.
On Wall Street overnight, the S&P 500 fell 0.3 per cent for a second modest drop since setting its all-time high on Friday. The Dow Jones Industrial Average dipped 0.3 per cent, and the Nasdaq composite sank 0.6 per cent.
The action was stronger in the oil market, where the price for a barrel of Brent crude briefly jumped above $US90 in the morning before falling back below $US87. It eventually settled at $US88.91, up 1.4 per cent from Monday.
Such erratic moves have become typical since the United States and Israel attacked Iran in late February, which led to the closure of the Strait of Hormuz and kept much of the world’s oil pent up in the Middle East. Last month alone, Brent’s price veered between $US72 and $US102 per barrel.
Higher oil prices make inflation worse. That will get Wall Street’s attention focused early Thursday AEST when the US government releases its latest monthly reading on inflation. Economists expect it to show inflation remains high but that it decelerated to 3.4 per cent in July from 3.5 per cent in June.
That could help the Federal Reserve, whose members are notably split on whether they should be raising the country’s interest rates to keep a lid on inflation. While higher rates could help slow the increases of prices on store shelves, they would also slow the overall US economy by making it more expensive for US households and businesses to borrow money. They would also undercut prices for stocks and other investments.
Traders are betting on a coin flip’s chance that the Fed will raise its main interest rate at its next meeting in September, according to data from CME Group. If it does, that would be the first increase in more than three years. It also could anger President Donald Trump, who has been lobbying for lower interest rates.
Treasury yields have jumped since the war with Iran because of higher oil prices and worries about inflation, sending long-term mortgage rates to their highest levels in a year.
The 10-year Treasury yield eased back on Tuesday, falling to 4.69 per cent from 4.72 per cent late Monday. But it remains well above its 3.97 per cent level from before the war with Iran.
With AP, Bloomberg
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