ASX Close: Back-to-back losses as rally stalls

The share market trimmed its best monthly return since last March ahead of overseas risk events.

The S&P/ASX 200 eased five points or 0.07 per cent on the last session of the month to its first back-to-back loss of the new year.

Gains today in supermarkets, healthcare stocks and bulk metal miners were outweighed by declines in tech and property stocks and some banks.

What moved the market

A banger of a month for investors ended with a whimper as an early rally today proved unsustainable. The ASX 200 hit a fresh nine-month high in morning trade before profit-taking set in. Following a 12-point loss yesterday, the result was consecutive losses for the first time since before the countdown to New Year.

“The ASX200 has reversed lower this afternoon on month-end selling rebalancing flows, and softer-than-expected retail sales and housing credit data for December,” Tony Sycamore, market analyst at IG, said.

Today’s loss shaved the index’s tally for the month to a not-insignificant 438 points or 6.2 per cent, the best return since March.

The market briefly extended its morning gains after a collapse in retail sales appeared to alleviate pressure on the Reserve Bank to raise benchmark rates next week. Retail turnover contracted 3.9 per cent last month as the increasing cost of living dampened buying. The decline was the first in 12 months and the fourth largest on record.

“The large fall in December suggests that retail spending is slowing due to high cost-of-living pressures. Retail businesses reported that many consumers had responded to these pressures by doing more Christmas shopping in November to take advantage of heavy promotional activity and discounting as part of the Black Friday sales event,” Ben Dorber, head of retail statistics at the Australian Bureau of Statistics, said.   

The Reserve Bank meets next week for the first policy meeting of 2023. The bank is expected to hike the cash rate target by 25 basis points following the biggest increase in annual inflation since 1990.

Consumer confidence continued to recover from recession levels. The ANZ-Roy Morgan confidence index edged up 0.9 per cent to 86.8. While the index remained far below the long-term average, the four-week moving average rose to its highest since June.

US stocks retreated overnight ahead of rates decisions, earnings from the market’s biggest companies and December jobs data. The S&P 500 fell 1.3 per cent.

Winners’ circle

Supermarkets Woolworths and Coles were among the day’s best performers following upgrades from Credit Suisse. Woolworths rallied 3.77 per cent. Coles gained 2.36 per cent.

Healthcare was the session’s other big winner. ResMed led with a rise of 2.36 per cent. Cochlear added 1.76 per cent, CSL 1.73 per cent and Pro Medicus 1.5 per cent.

Beach Energy rallied 0.33 per cent after reaffirming its confidence in the prospects for the Perth Basin despite downgrading its reserves there. CEO Morne Englebrecht said the firm was confident it would meet its domestic demand commitments.

Record quarterly production failed to lift Nickel Industries. The Indonesia-focussed miner finished flat after producing 23,072 tonnes of nickel metal, up from 20,275 tonnes the previous quarter. Record sales of US$371.2 million helped generate record earnings of US$90 million.

Flight Centre entered a trading halt to raise funds to acquire luxury travel brand Scott Dunn. The travel agent will pay $211 million for the UK firm, which specialises in tailor-made high-end holidays. The acquisition will be funded via a $180 million institutional placement and a $40 million retail share purchase offer.

Doghouse

Network connectivity specialist Megaport tumbled 24.74 per cent amid signs of slowing growth last quarter. The company said “current economic certainty seems to be delaying customer decision making”. Customer numbers increased just 1 per cent from the previous quarter. Monthly recurring revenues grew 7 per cent.  

A record half-year profit failed to keep nickel miner IGO in positive territory during a tough session for battery metal producers. The miner increased its first-half profit sixfold to $591 million from $91 million in 1H22. Revenue increased 43 per cent to $542 million. Shares in the firm dropped 7.08 per cent.

Other battery metal producers to feel the heat from an overnight softening in sentiment included Sayona Mining -11.86 per cent, Allkem -7.48 per cent and Lake Resources -6.86 per cent.

Centuria Industrial REIT declined 0.6 per cent from a seven-month high after reaffirming guidance for its full-year distribution and funds from operations. The firm’s returns were supported by an acceleration in industrial market rents due to low vacancies and solid demand.

A revenue and earnings downgrade just weeks after returning to the boards drove beauty and personal care retailer BWX down 10.42 per cent. The company lowered its revenue guidance from $205-$230 million to $170-$190 million. Forecast earnings dropped to $10-$15 million from previous guidance of $25-$30 million. Weak US sales and stock shortages were cited as causes for the downgrade.

Infant formula specialist Bubs dropped 11.27 per cent after China’s Covid-19 lockdowns caused a slump in a key market. Chinese revenues contracted by 66 per cent in the second quarter, comparted to the prior corresponding period. Group revenues declined 28 per cent to $14.3 million.  

Vicinity Centres dipped 0.96 per cent after appointing Peter Huddle as CEO and Managing Director. Huddle joined the firm as Chief Operating Officer in 2019 and had been acting CEO since mid-November.

Other markets

Asian markets turned firmly south in afternoon trade. The Asia Dow dropped 0.83 per cent, Hong Kong’s Hang Seng 1.27 per cent, China’s Shanghai Composite 0.38 per cent and Japan’s Nikkei 0.22 per cent.

S&P 500 futures reversed slim early gains, falling four points or 0.1 per cent.

Oil added to last night’s 2 per cent decline. Brent crude slid 33 US cents or 0.4 per cent to US$84.17 a barrel.

Gold dipped US$3.20 or 0.17 per cent to US$1,919.70 an ounce.

The dollar faded 0.28 per cent to 70.38 US cents on weakened expectations for higher rates.