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The share market erased almost two weeks of gains as the dollar hit a seven-week high and mining giant Fortescue Metals went ex-dividend.
The S&P/ASX 200 fell as much as 83 points before trimming its fall to 51 points or 0.67 per cent. The decline wiped out last week’s 35-point advance and much of a 27-point rally the week before.
Trading volumes were capped by a US market holiday tonight. Ten of eleven sectors retreated. Fortescue Metals, eighth largest company on the index, plunged ten per cent as its shares traded without the right to a record dividend.
What’s driving the market
Weak leads from Wall Street, a resurgent Australian dollar and the pending payment of hundreds of millions in dividend payments contributed to an unexpectedly soft session for the local market.
US stocks traded mixed heading into the Labor Day long weekend as declines in cyclical sectors offset gains in Big Tech. The Nasdaq Composite climbed 0.21 per cent, the Dow fell by the same margin and the S&P 500 – the most balanced of the three – ended flat.
The difference between the major indices reflected the response to disappointing jobs news. Investors dumped cyclical stocks exposed to the economic cycle in favour of pandemic-resistant growth stocks.
The dollar firmed almost 1 per cent as the payrolls data depressed the greenback. The Aussie has bounced roughly three and a half cents in recent sessions. A strong dollar is a headwind for exporters because it makes Australian produce and raw materials more expensive for holders of other currencies.
“The AUD and NZD were outperformers on Friday, both up around 0.6-0.7% to be around 2% higher on the week. Both appear to have firmly broken out of recent ranges,” Tapas Strickland, NAB Director, Economics, said.
Fortescue Metals was the biggest drag on the index, falling 10.07 per cent. The miner will pay shareholders a record $2.11 per share. Other companies going ex-dividend included Viva Energy -4.46 per cent, Orora -3.03 per cent, Ramsay Health Care -2.67 per cent and ASX -2.25 per cent.
Job advertising slumped 2.5 per cent last month, but remained well above last year’s low. Ad numbers have declined just 3.7 per cent since the start of the Greater Sydney lockdown, versus a plunge of 64 per cent last year.
Going up
A ten-year high in aluminium prices helped propel Alumina up 5.01 per cent towards a seventh straight advance. Metal prices have been boosted by shortage fears after China imposed limits on smelters.
Tech was the pick of Friday’s US movers and the only sector here to buck the downtrend. Appen climbed 3.61 per cent, Nearmap 1.94 per cent, Technology One 1.33 per cent and Afterpay 0.49 per cent.
Gold miner Newcrest advanced 2.34 per cent after a decline in the greenback helped lift gold to an 11-week peak. Evolution gained 3.85 per cent, Ramelius 3.57 per cent and Gold Road Resources 2.6 per cent.
ResMed shrugged off media reports a US university had filed a patent infringement claim against the sleep apnea specialist. The University of New York reportedly seeks unpaid royalties, interest and costs for an alleged infringement by ResMed’s AirSense 10 product. The share price overcame early weakness, rising 0.51 per cent.
Going down
Santos and Oil Search declined after extending the due diligence period for their proposed merger by a week to September 13. The energy majors are negotiating terms to form one of the 20 largest oil and gas companies in the world. Santos declined 2.56 per cent. Oil Search shed 2.87 per cent.
Lithium miner Pilbara Minerals sank 6.42 per cent on news Mineral Resources divested its 5.4 per cent shareholding. Mineral Resources (MRL) sold its holding in a block trade to institutional investors for $328 million. MRL will use the funds for capital expenditure.
IAG eased 0.74 per cent after CMC Hospitality filed a case against the insurer over disputed claims for business interruptions caused by Covid. The insurance industry is locked in a dispute over whether business policies cover Covid-induced stoppages.
Hansen Technologies dived 8.91 per cent on news suitor BGH Capital had walked away. The Australian private-equity firm withdrew a conditional, non-binding offer to buy all the shares in Hansen for $6.50 cash per share after conducting due diligence. Hansen shares fell to $5.62.
Washington H Soul Pattison eased 3.36 per cent despite upgrading full-year guidance ahead of reporting later this month. The investment group expects net profit to almost double this year to $316-$336 million from $170 million in FY20, thanks to strong earnings at coal miner New Hope and record property earnings at Brickworks.
BlueBet Holdings fell 19.23 per cent after missing out on a Sports Betting Permit in Virginia. The online wagering group withdrew its application after being advised permits would only be granted to operators with experience in other states.
The banks ignored a jump in lending rates. CBA dropped 0.82 per cent, ANZ 0.07 per cent, NAB 0.08 per cent and Westpac 0.98 per cent.
Other markets
Australia was an outlier during a positive morning on Asian markets. The Asia Dow rallied 0.4 per cent, China’s Shanghai Composite 0.41 per cent, Hong Kong’s Hang Seng 0.48 per cent and Japan’s Nikkei 1.66 per cent.
US futures dipped ahead of tonight’s market holiday. S&P 500 futures eased four points or 0.1 per cent.
Oil declined for a second session. Brent crude fell 78 US cents or 1.07 per cent to US$71.83 a barrel after Friday’s jobs report suggested the US recovery may be losing momentum.
Gold dipped US$4 or 0.22 per cent from Friday’s 11-week high to US$1,829.70 an ounce.
The dollar eased 0.09 per cent to 74.36 US cents.
