The local share market has finished ever so slightly in the red, clawing back most of its earlier losses after weaker quarterly inflation data increased the odds of the Reserve Bank leaving interest rates unchanged next week.
The benchmark S&P/ASX200 index on Wednesday finished down 5.7 points, or 0.08 per cent, at 7,316.3, while the broader All Ordinaries dropped 9.4 points, or 0.13 per cent, at 7,502.8.
“It’s kind of funny how on the one hand, you’ve got Bank of England, where inflation came down to 6.6 per cent, and that’s treated as frantic rush to get more hikes. And you come over to Australia, and seven per cent inflation doesn’t warrant a hike, apparently.”
But unlike other central banks, the RBA says it is basing its approach on inflation expectations rather than the inflation rate, and by that logic it should not be hiking at its next meeting, Mr Simpson said.
“I think it’s inevitable that we’ll have to hike at some point, they’re just not going to do it immediately,” he said.
The inflation readout might have led to more gains on the ASX, Mr Simpson said, but the market was jittery after overnight losses on Wall Street where the S&P500 suffered its worst loss in a month, dropping 1.6 per cent on signs the banking crisis might not be over after all.
First Republic shares plunged by half after the mid-sized US bank said customers had pulled more than $US100 billion in deposits, despite a $30b bailout last month.
“So it did rekindle fears that we’re not out of the woods fully on the financial meltdown in US, that has kind of killed sentiment there,” he said.
The ASX’s 11 sectors finished mixed, with three up, four down and four basically flat.
The heavyweight materials sector fell for a fourth straight day, dropping 0.7 per cent following China’s plan to boost domestic production of iron ore. The commodity was selling for $US106.50 a tonne, its lowest level since early December.
BHP dropped 0.4 per cent to $44, Fortescue Metals fell 0.5 per cent to $20.66 and Rio Tinto retreated 1.1 per cent to $111.94.
Also, Mineral Resources plunged 9.7 per cent to a six-month low of $72.59 after downgrading guidance for its mining services business and reporting weaker than expected third-quarter lithium sales.
Goldminers were higher, however, with both Newcrest and Northern Star adding around one-and-a-half per cent and Evolution climbing 3.5 per cent as gold prices held just under $US2,000 an ounce.
In the financial sector, the big banks were mixed. Westpac climbed 0.3 per cent to $22.31 and NAB added 0.2 per cent to $28.84, while CBA dipped 0.2 per cent to $99.89 and ANZ was flat at $24.21.
Elsewhere, Synlait plunged 26.5 per cent to an all-time low of $1.44 after the New Zealand milk company announced it was now expecting a $5 million full-year loss, rather than a $5m profit after a key customer – believed to be US nutrition giant Abbott – had reduced its orders. A2 Milk dropped 5.1 per cent to $5.42.
Kogan grew 7.2 per cent to a one-month high of $5.42 after the online retailer announced it had returned to “consistent underlying profitability” in the March quarter after finally reducing its excess inventory.
“The journey to get here has been one of the toughest in our 17-year history, but also one of our most rewarding,” said CEO and founder Ruslan Kogan.
Two widely held shares were both hitting their highest levels in over a year. Wesfarmers climbed 0.5 per cent to a 14-month high of $52.64 and Telstra gained 0.7 per cent to a five-year high of $4.33.
In small caps, CardieX jumped 10.5 per cent to a six-week high of 37c after US regulators approved its world-first customisable dual blood pressure monitor, which measures both brachial and central blood pressure.
In foreign exchange, the Australian dollar was close to falling under 66 US cents for the first time since early March.
The Aussie was buying 66.07 US cents, from 66.76 US cents at Monday’s ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Wednesday down 5.7 points, or 0.08 per cent, at 7,316.3.
* The broader All Ordinaries dropped 9.4 points, or 0.13 per cent, to 7,502.8.
One Australian dollar buys:
* 66.08 US cents, from 66.69 US cents at Monday’s ASX close
* 88.32 Japanese yen, from 89.48 Japanese yen
* 60.03 Euro cents, from 60.77 Euro cents
* 53.12 British pence, from 53.71 British pence
* 107.71 NZ cents, from 108.77 NZ cents.
(Australian Associated Press)