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The share market’s losing run stretched to a third session as surging Chinese producer prices sharpened inflation worries and depressed US equity futures.
The S&P/ASX 200 shed 10 points or 0.14 per cent, continuing a run of modest setbacks. The benchmark has retreated 33 points from Friday’s seven-week closing high.
Declines in the mining majors outweighed gains in banks and utilities. BHP, Rio Tinto and Fortescue Metals fell with ore prices. NAB hit a three-and-a-half-year high.
What moved the market
The market peaked around mid-day, then faded as Asian markets reacted to the strongest growth in Chinese factory-gate prices in 26 years. Producer prices last month were 13.5 per cent higher than the same time last year, trumping economists’ expectations for growth of around 12.3 per cent.
Higher production costs are likely to be passed onto consumers in the months ahead. Consumer prices also came in stronger than expected, up 1.5 per cent versus the forecast 1.4 per cent.
“Another sign of that strong and persistent global inflation pulse,” tweeted IG market analyst Kyle Rodda.
The Asia Dow retreated 0.6 per cent, China’s Shanghai Composite 1.2 per cent, Hong Kong’s Hang Seng 1.18 per cent and Japan’s Nikkei 0.49 per cent.
US futures also declined. S&P 500 futures fell 17 points or almost 0.4 per cent.
Overnight, US stocks retreated for the first time in nine sessions as US producer prices came in “hot”, but not as strong as some economists predicted. The S&P 500 eased 0.35 per cent. Inflation remains in the spotlight tonight when the Bureau of Labor Statistics releases its October consumer price index.
“Investors took a cautious approach [last night] ahead of important inflation data due tonight, which will further provide clarity on the state of inflationary pressures,” Kalkine Group CEO Kunal Sawhney said.
“The upcoming inflation data will be closely watched by Fed officials, who expect price increases to gradually ease some time next year and drift towards the central bank’s annual target. Any further increase in inflation could prompt the central bank to take a more aggressive approach to bond purchase reductions and ponder over early interest rate hikes.”
This morning’s ASX gains came after a report showed Australians were the most optimistic about their employment prospects in more than two decades. Westpac’s measure of unemployment expectations plunged 11 per cent last month to “the lowest level for the index since the mid-1990s”. The lower the reading, the less fear of unemployment.
“Confidence is at historic highs for both males and females although the confidence amongst females is particularly buoyant – near all-time record levels going back to 1975,” Westpac chief economist Bill Evans said.
“Employees in the following industries are the most confident about the job situation: real estate; accommodation and food; media and telecommunications; health care; and retail. This may be an indication of where labour shortages are likely to emerge in coming months.”
The bank’s consumer sentiment index remained at elevated levels, improving 0.6 per cent this month to 105.3.
Winners’ circle
Yesterday’s standout performer, Chalice Mining, led for a second day, rising 4.94 per cent to a record. The miner yesterday hailed its Gonneville maiden resource as Australia’s biggest nickel sulphide discovery in 20 years.
Seven West Media rose 2.65 per cent to a near three-year high in the wake of its acquisition of regional broadcaster Prime Media and a trading update yesterday.
The financial sector reversed yesterday’s decline despite pressure on lending rates. The yield on ten-year Australian government bonds fell to a three-week low in the wake of a similar move in the US overnight.
NAB bounced 4.36 per cent, comfortably reversing yesterday’s post-earnings slide. Westpac put on 0.84 per cent, ANZ 0.75 per cent and CBA 0.09 per cent.
Among traditional defensives, United Malt Group gained 4.62 per cent, Atlas Arteria 2.72 per cent, Collins Foods 2.69 per cent and Reece 2.12 per cent. Goodman Group gained 0.98 per cent, Transurban 0.51 per cent and Telstra 0.26 per cent.
A positive trading update boosted metals recycler Sims 0.42 per cent. CEO Alistair Field told today’s AGM the company expects underlying earnings to increase sixfold this half from the prior corresponding period to $310 – $350 million.
Doghouse
Gold miner Ramelius slipped 3.22 per cent after Gold Road Resources dropped out of the bidding for Apollo Consolidated. Gold Road declined to raise its 56-cents-per-share offer for Apollo, deciding instead to accept Ramelius’s off-market offer for its 19.9 per cent holding. Apollo shares dropped 3.08 per cent. Gold Road gained 0.34 per cent.
Vicinity Centres slid 2.26 per cent after reporting a 25.7 per cent decline in retail sales at its shopping centres in NSW and Victoria during a first quarter impacted by lockdowns. The decline was partly offset by a 7.1 per cent increase in unaffected States.
Monday’s surge in travel and tourism stocks continued to fade. Webjet sagged 3.21 per cent, Corporate Travel Management 2.3 per cent, Flight Centre 1.9 per cent and Qantas 2.23 per cent.
Iron ore miners fell after Singapore ore futures dropped below US$90 a tonne. December futures declined 5.2 per cent this afternoon, according to the Australian Financial Review. BHP shed 2.7 per cent, Fortescue Metals 2.12 per cent and Rio Tinto 1.65 per cent.
Communications and metal detection specialist Codan eased 0.29 per cent following the appointment of former Detmold Group CEO Alf Ianniello as Managing Director and CEO. Mr Ianniello replaces Donald McGurk, who will retire in January.
Other markets
Oil extended last night’s two-week high. Brent crude firmed 31 US cents or 0.37 per cent to US$85.09 a barrel.
Gold faded $US3 or 0.16 per cent to US$1,827.80 an ounce.
The dollar eased 0.12 per cent to 73.67 US cents.
