The S&P/ASX 200 reached mid-session six points or 0.1 per cent in the red. The index hit an eight-week low at 6715 before paring its fall to 6733.
Just two of eleven sectors advanced. Rebounds in iron ore and gold boosted the mining majors during a mixed morning for the banks.
What’s driving the market
A brief opening rally gave way to further weakness ahead of a US rate hike this week and a market holiday on Thursday. Public holidays today in Japan and the UK may also have subtracted from trading volumes.
The ASX was coming off its third losing week in the last four amid fears this year’s aggressive rate hikes will tip the global economy into recession. US stocks slumped to a two-month low on Friday after the head of economic bellwether FedEx warned a global recession was increasingly likely. The S&P 500 sank 0.72 per cent.
“Last week will… be marked out as one of the more tumultuous for financial markets since the early days of the pandemic. It encompassed an almost 8% high to low swing in the NASDAQ (6% for the S&P500), 43bps low to high range for the US 2-year Treasury yield (23bps for the 10-year) and 2.4% ranges for both the DXY USD index and AUD/USD, the latter recording a new 2-year low on Friday of 0.6670,” NAB’s head of FX strategy Ray Attrill said.
A two-day Federal Reserve meeting starting tomorrow is the highlight of a truncated week. The US central bank is widely expected to increase the target federal funds rate by at least three-quarters of a percentage point. An increase of a full percentage point is also a possibility.
“The question is by how much the Fed will increase the interest rate given that inflation isn’t dead yet. The CPI number released [last] week came ahead of expectations of 8.1%, and now many in the market are thinking if the Fed will increase the interest rate by a full percentage point,” Naeem Aslam, chief market analyst at AVATrade, said.
The dollar was also under pressure, hitting a two-year low of 66.7 US cents on Friday before bouncing this morning to 67.05 US cents. A weaker dollar is a plus for exporters, a negative for importers. This year’s decline has come as risk aversion lifts the US dollar index to its highest in around two decades.
Going up
Iron ore climbed 0.8 per cent this morning on the Dalian Commodity Exchange after the Chinese megacity of Chengdu emerged from lockdown. That helped lift Rio Tinto 0.83 per cent, Fortescue Metals 0.14 per cent and BHP 0.37 per cent.
A Friday bounce in gold lifted industry heavyweight Newcrest 1.68 per cent off a near six-year low. Sandfire gained 2.59 per cent, Northern Star 2.57 per cent and St Barbara 1.88 per cent.
The real estate investment trust sector steadied near a two-and-a-half-month low as bond yields retreated. Abacus Property firmed 2.27 per cent, GPT Group 2.35 per cent, SCA 2.22 per cent and Scentre Group 2.01 per cent.
Confirmation of progress at Lake Resources’ demonstration plant in Argentina sent the lithium miner’s share price soaring 13.98 per cent. Lake said a facility to house the demonstration plant was complete and the firm was confident on-site operations would be successful. The share price tumbled last week after the miner reported a dispute with project partner Lilac Solutions.
A strong morning for lithium miners saw Pilbara Minerals add 5.12 per cent, Mineral Resources 4.26 per cent and Allkem 3.12 per cent.
Imugene firmed 1.14 per cent after the Australian gene technology regulator greenlit an expansion of the firm’s phase 1 Vaxinia clinical trial for treating cancer.
Hedge fund sponsor Regal Partners rallied 3.14 per cent after winning a mandate worth more than $420 million from a large domestic superannuation fund. The mandate will expand the firm’s $5 billion in funds under management as of August 31.
Going down
Link Administration skidded 3.17 per cent to a two-month low after rejecting the latest revised offer from Dye & Durham. The Canadian firm revised its acquisition proposal to $3.81 per share with fresh conditions after the UK regulator warned a Link subsidiary could face heavy fines relating to a collapsed fund. The Link board said it was unable to recommend the new proposal.
Infomedia fell 4.23 per cent after reporting it had not received acceptable binding offers from either of two parties competing to acquire the automotive tech firm. The company said it would close its virtual data room on September 30 in the absence of an acceptable binding proposal.
Origin Energy will divest its gas interest in the Beetaloo Basin in the Northern Territory as part of a shift towards greener energy. Tamboran Resources will raise $133 million to buy the interest. Origin’s share price eased 0.34 per cent. Shares in Tamboran were placed in a trading halt.
Rival AGL lost 2.32 per cent after announcing management and boardroom reshuffles. CEO Graeme Hunt and Chair Peter Botten will both stand down.
Splitit eased 3.57 per cent on news the US financial regulator plans to regulate buy now, pay later lenders similarly to credit card companies. The firm said it would be largely unaffected by the change.
Other markets
A weak session on Asian markets saw the Asia Dow fall 0.38 per cent, China’s Shanghai Composite 0.53 per cent and Hong Kong’s Hang Seng 1.2 per cent. Trade in Japan was suspended for a public holiday.
US futures turned lower in Sunday night US trade. S&P 500 futures dropped 15 points or 0.4 per cent.
Oil added to Friday’s rebound. Brent crude rallied 76 US cents or 0.8 per cent to US$92.11 a barrel.
Gold slipped US$6.60 or 0.4 per cent to US$1,676.90 an ounce.
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