Join our daily newsletter At The Bell to receive exclusive market insights
Aussie shares struggled for traction as gains in growth stocks were offset by declines in miners and insurers ahead of global risk events later this week.
The S&P/ASX 200 eased seven points or 0.1 per cent by mid-session. The Australian benchmark inched to a nine-month closing high on Friday but has shown signs in recent sessions of losing momentum after surging 6.5 per cent this month.
The Nasdaq’s outperformance in the US helped tech firms Block, WiseTech, Xero and NextDC all gain at least 3 per cent. Insurers IAG and Suncorp were among the biggest drags following a surge in claims after floods in New Zealand.
What’s driving the market
The share market appeared to be in a holding pattern as investors wait to see how the January rally weathers several risk events this week. The key event is Wednesday night’s US interest rate decision. The market is betting cooling inflation will allow the Federal Reserve to reduce the size of the next rate hike from 50 basis points last time to 25 bps.
“The favoured market view of 25 points is a possibility,” Clifford Bennett, chief economist at ACY Securities, said. “Should it occur… markets will most certainly celebrate,” he added.
“Should the Fed hike by 50 points, then risk-off responses would quickly follow. Having enjoyed a lengthy rally, stocks could be badly exposed.”
Wednesday’s decision is not the only event on the calendar with the potential to change the current bullish market mood. Rate rises are also expected in Europe and the UK.
“This week the calendar is loaded with events… including central bank meetings from the FOMC, ECB, and BoE. PMIs for the US, UK, and EA, as well as CPI readings across the euro area. It’s also the busiest week for US corporate earnings, with 32% of the S&P500 by market capitalization expected to report results,” Tony Sycamore, market analyst at IG, wrote.
US stocks extended their monthly tallies on Friday after the Fed’s preferred measure of inflation fell to a 14-month low. The S&P 500 firmed 0.25 per cent, bringing its January gain to 6 per cent. The Nasdaq Composite rallied 0.95 per cent for the session and is up 11 per cent for the month.
“The tech heavy NASDAQ led the gains in US equities again on Friday with the benchmark finishing the week with an impressive roll of four straight weekly gains. Mixed earnings by tech companies have seemingly been trumped by the prospect of an imminent Fed pause. December Core PCE printed in line with expectations but the yoy decline helped cement expectations for a downshift in Fed rate hike this week,” NAB currency strategist Rodrigo Catril said.
Going up
Growth stocks set the pace, mirroring a sharp rally in the US this month in anticipation of a rates pause in the months ahead. WiseTech climbed 4.65 per cent, Block 4.32 per cent and NextDC 3.58 per cent. Xero gained 3.01 per cent.
Core Lithium firmed 3.98 per cent after confirming it was on track to produce lithium spodumene concentrate at its Finiss operation in the NT in the first half of the year. CEO Gareth Manderson said the company continued to reach key milestones last quarter despite the impact of Tropical Cyclone Ellie.
A rebound in production and sales helped raise Lynas Rare Earths 4.74 per cent. The miner’s production increased from 3,500 tonnes in Q1 to 4,457 tonnes last quarter after water supply disruptions were fixed.
A $12 million deal with a US community health network lifted diagnostic imaging provider Pro Medicus 1.17 per cent to a 17-month high. The eight-year deal will see Oregon-based Samaritan Health Services replace legacy systems with Pro Medicus’s Visage 7 platform and modules.
Bega Cheese edged up 0.25 per cent after selling its 49 per cent holding in Vitasoy Australia for $51 million. The sale came after Vita International Holdings exercised a call option to buy out Bega’s share in the joint venture. The sale price was determined by an outside expert.
Canadian miner Patriot Battery Metals climbed 18.84 per cent after reporting “high-grade lithium mineralization” at its CV5 Pegmatite prospect in Quebec. The latest drilling results included 15 metres at 5.1 per cent lithium oxide. CEO and Director Blair Way said the firm “could not be more thrilled with the results”.
Takeover target OZ Minerals was unchanged after meeting revised copper production and costs guidance and original gold guidance. Copper production increased 21 per cent in the final quarter. The company is currently considering an offer from BHP.
Going down
Insurers fell as claims poured in following floods in New Zealand. Suncorp shed 1.99 per cent after receiving 3,000 claims across its Vero and AA Insurance brands. CEO Steve Johnston said it would take some time to determine the full extent of the damage.
IAG said it had logged more than 5,000 claims across its AMI, State and NZI brands. The share price dropped 3.64 per cent after the insurer said it might have to review its estimate for natural peril costs this financial year.
IGA operator Metcash fell 2.86 per cent following the resignation of Scott Marshall, the head of its food business. Marshall had been with the firm for more than 30 years.
The heavily-weighted materials sector was the morning’s biggest drag. Fortescue Metals sagged 1.87 per cent, Rio Tinto 1.09 per cent and Newcrest 0.49 per cent.
Further down the food chain, Champion Iron gave up 6.32 per cent, Perseus 3.78 per cent and Gold Road Resources 2.63 per cent.
Heavyweight drags included Coles -1.31 per cent, Woolworths -1 per cent and Wesfarmers -0.9 per cent.
Other markets
China’s Shanghai Composite rallied 1.08 per cent as trade resumed after the week-long Lunar New Year break. The Asia Dow inched up 0.11 per cent. Japan’s Nikkei added 0.18 per cent. Hong Kong’s Hang Seng shed 0.77 per cent.
S&P 500 futures retreated eight points or 0.2 per cent.
Oil reversed more than half of Friday’s 0.9 per cent loss. Brent crude bounced 52 US cents or 0.6 per cent to US$86.92 a barrel.
Gold declined US$4.30 or 0.2 per cent to US$1,925.10 an ounce.
The dollar eased 0.04 per cent to 71.04 US cents.
