The Australian sharemarkets recovery on Tuesday was short lived, with the market fall on Wednesday weighed down by a number of index heavyweights.
The S&P/ASX 200 index closed 3.8 points, or 0.1 per cent lower at 6175.9, falling for the ninth time in the last ten sessions.
Many of the major insurers traded lower on Wednesday, as the banking royal commission into the financial services delves into the insurance industry. Suncorp Group fell 1.7 per cent to $14.52 and QBE Insurance closed 0.4 per cent lower at $10.93.
A fall in base metal prices in London on Tuesday pushed the local major mining stocks lower on Wednesday. BHP fell 0.3 per cent to $31.10, while Rio Tinto closed 0.4 per cent lower at $71.06.
Bega Cheese shares fell 5.7 per cent to $7.15 after it returned from a trading halt following a successful non-underwritten institutional share placement to raise $200 million. Bega raised the funds at $7.20 per share, a 5 per cent discount to its closing price on Friday.
Myer shares closed 4.6 per cent lower at 41.5¢ after it posted a $486 million loss in 2018. Underlying profit for the year was down 52.2 per cent to $34.5 million, falling short of market forecasts.
CSL resumed its recovery from three-week lows on Wednesday after trading ex-dividend on Tuesday. The health care company led losses in the sector last week, falling close to 10 per cent. On Wednesday, CSL’s shares closed 0.6 per cent higher at $211.95.
A sharp rise in oil prices overnight helped to lift the energy sector on Wednesday, with most of the sector’s largest stocks leading the market gains.
Brent crude oil is now trading just a few cents below $US80 a barrel. Woodside Petroleum advanced 1.6 per cent to $36.70, while Origin Energy closed 2.6 per cent higher at $8.28.
Santos shares also lifted, advancing 2.7 per cent to $6.93 after it signed a new five-year gas supply deal with Brickworks, who will receive supply of wholesale gas for it Queensland, Victorian and South Australian operations.
1414 Degrees lost more than a third of its value in its first day on the ASX boards on Wednesday. The energy storage company’s shares had an issue price of 35¢ but it closed the day at 22.5¢, down 35.7 per cent. The fall has been blamed on profit taking with investors who got in when shares were as cheap as 10¢, selling their stake.
Morgans upgraded Macquarie Group’s price target on the back of the company’s CLSA conference presentation and market update. According to Morgans, the management’s outlook commentary appears to be a slight upgrade to its previous guidance if the profit from the Quadrant Energy sale is factored in. It also said that the company appeared to be tracking well for the financial year so far with reasonably robust activity levels across all Macquarie’s divisions, excluding Corporate and Asset Finance. While the broker acknowledged that Macquarie’s valuation was starting to get stretched, a 10 per cent total shareholder return meant it was retaining its ‘add’ recommendation. The broker upgraded the company’s EPS for the next two years by 4-8 per cent and lifted its price target to $130.72.
What moved the market
Base metal prices continued to fall as fears that President Donald Trump would impose tariffs on all of China’s exports to the United States left investors trading defensively. Copper fell by 0.8 per cent on the London Metal Exchange on Tuesday, while the price of lead and zinc fell by 3.2 per cent. The price of aluminium also fell but this was likely due to China’s aluminium exports which despite falling for the month of August, remain close to the highest level since December 14. Exports are up 14.6 per cent year-on-year for the first eight months of the year, offsetting some of the losses from sanctioned Russian miner RUSAL.
Supply concerns lifted the price of oil sharply with Brent crude now trading just 1.1 per cent below $US80 a barrel. Sanctions on Iran are beginning to take their toll, with the Islamic Republic resorting to storing oil offshore on its fleet of supertankers. While the sanctions are not due to start until early November, countries including France and South Korea have started to cut back on purchasing of Iranian oil. In the United States, Hurricane Florence is also threatening East Coast gasoline markets as mass evacuations stretch supplies and heavy rains put major fuel pipelines at risk.
The Indian rupee has extended its run as the worst performing Asian currency this year as a number of factors offset strong GDP growth in the country. Higher oil prices, a broad sell-off in emerging markets, a widening current account deficit and a worsening balance of payments are all hampering the currency’s value. The rupee hit a fresh record low on Tuesday with one US dollar buying 72.75 rupees, down from 62.44 rupees in January. The country’s bonds are also stoking inflationary pressures with the India’s 10-year benchmark bond yield rising to 8.19 per cent, its highest level since November 14.
The latest Westpac/MI consumer survey found that consumer confidence fell 3 per cent during September, mirroring a fall in business confidence during August. AMP chief economist Shane Oliver said in a note on Wednesday that the ongoing political turmoil in Canberra was likely to blame. “While other factors may also be impacting, including ongoing news of falling home prices, its likely that political turbulence in Canberra has been a driver of the fall in confidence, just as the election of the LNP Coalition in 2013 with the hope of political stability after the Rudd/Gillard/Rudd years provided a boost to confidence,” he said.