by Melissa Darmawan
Australian shares ran out of steam and closed at session lows as investors mulled on whether the fresh stimulus from Beijing is enough to offset China’s lockdowns as tech shares sell-off after Snap’s grim revenue outlook.
The news doesn’t get any better as investors digested Japan’s manufacturing activity grew at its slowest pace in three months in May. Supply chain challenges due to parts shortages and China’s Covid-19 lockdowns have slowed production and new orders growth, according to the au Jibun Bank Flash Japan Manufacturing Purchasing Managers’ Index.
Across the Tasman, retail sales in New Zealand fell 0.5 per cent in the March quarter after an 8.3 per cent increase in the last December quarter, weighing further on the health of the consumer after last week’s mixed results from retail giants on Wall St.
While in Asia, Chinese shares fell as investment banks such as UBS and JP Morgan cut their growth forecasts for China. Hong Kong shares fell amid Chief Executive Carrie Lam said that it will be unlikely to scrap hotel quarantine before July.
The data that has hit the tape have painted a gloomy picture ahead of more US inflation and the GDP figures due this week as investors take risk off the table.
On the local market, eight sectors closed lower to the rest, dragged down by information tech by 3 per cent, communication services by 1.9 per cent, and utilities by 1.2 per cent. Property was the best performer up 0.5 per cent, followed by financials added 0.3 per cent and a flat finish with the energy sector.
Positive comments from JPMorgan CEO Jamie Dimon about the state of the economy provided support for banks to rally. National Australia Bank (ASX:NAB) added 1.1 per cent to $31.09 and Commonwealth Bank (ASX:CBA) rose 0.6 per cent to $105.09. Macquarie Bank (ASX:MQG) bucked the trend, down 0.6 per cent to $178.81.
Fortescue Metals Group (ASX:FMG) rose 0.3 per cent at $20.77, Rio Tinto (ASX:RIO) added 0.9 per cent at $110.4, while BHP Group (ASX:BHP) shed 0.06 per cent at $47.80.
Following Qantas’ (ASX:QAN) plans to fully buyout Alliance Aviation Services (ASX:AQZ), the flying kangaroo has decided to snap up a 51 per cent stake with TripADeal in an all cash purchase. With the value of the deal undisclosed, the news was enough to send the share price lower by 1.5 per cent to $5.38.
Tabcorp (ASX:TAH) shares dived 80.2 per cent to $1.05 after it demerged its lotteries and Keno business with The Lottery Corp (ASX:TLC) closing at $4.70 per share.
Nufarm (ASX:NUF) tumbled 14.6 per cent to $4.99 after the company’s largest shareholder, Sumitomo Chemical, sold its entire 15.9 per cent stake.
Despite the two day low from the local index, consumer confidence jumped 1.5 points to 90.8 this week in the lead-up to the Federal Election, its first increase for over a month since mid-April after four straight weekly declines, according to ANZ-Roy Morgan.
At the closing bell, the S&P/ASX 200 was 0.3 per cent or 20 points lower at 7,129.
What’s ahead
Investors are closely keeping an eye on the moves amid President Joe Biden floating the idea of tariff cuts on Chinese goods and as the US announced the Indo-Pacific Economic Framework with Asian partners including Australia, Japan and South Korea. Eurozone and US PMIs are due with US new home sales also on the docket.
Broker moves
There have been several brokers reducing Incitec Pivot’s (ASX:IPL) target price after their news to split its Fertiliser and Dyno Nobel businesses into two separate listed companies in the first half of 2023.
Credit Suisse rates Incitec Pivot (ASX:IPL) as outperform, reducing its target price to $4.05 from $4.28. The broker believes that the demerger is a positive move. Prior to public company costs of $25 million to $35 million, the broker anticipates Incitec’s fertilisers to achieve earnings of $180 million to $190 million with earnings largely conditional on Phosphate Hill’s cost position. Currently, it remains tied to fixed price gas contracts through to 2028. Shares in Incitec Pivot (ASX:IPL) closed 1.4 per cent lower to $3.55, extending from its 7.5 per cent tumble yesterday.
UBS upgraded Wesfarmers (ASX:WES) to a buy from neutral and raised its price target to $56 from $54. The broker cites that its non-retail divisions were the source of the upside to its first half performance and are on track to contributing a large share of earnings. The broker estimates the Chemicals Energy & Fertilisers business along with an exposure to lithium upside can offset the mixed outlook for retail. Shares bucking the trend of the overall market, closing 0.3 per cent higher to $46.31.
UBS upgraded Evolution Mining (ASX:EVN) to neutral from sell with a reduced price target to $4.05 from $4.13. The broker retains its US$1,500 per ounce long-term gold price forecast and expects supply chain pressures and inflation to persist amid the skilled labour shortages. While Evolution Mining is not the broker’s preferred company, due to current prices, the risk is already priced-in hence the upgrade in rating. Shares fell 0.8 per cent to $3.69.
Futures
The Dow Jones futures are pointing to a fall of 229 points.
The S&P 500 futures are pointing to a fall of 46 points.
The Nasdaq futures are pointing to a fall of 208 points.
The SPI futures are pointing to a fall of 27 points when the market next opens.
Asian markets
Japan’s Nikkei has lost 0.9 per cent.
Hong Kong’s Hang Seng has lost 1.7 per cent.
China’s Shanghai Composite has lost 1.5 per cent.
Best and worst performers
The best-performing sector was Real Estate Investment Trusts, up 0.5 per cent. The worst-performing sector was Information Technology, down 3 per cent.
The best-performing stock in the S&P/ASX 200 was Allkem (ASX:AKE), closing 3.7 per cent higher at $13.46. It was followed by shares in Perseus Mining (ASX:PRU) and Pilbara Minerals (ASX:PLS).
The worst-performing stock in the S&P/ASX 200 was Tabcorp Holdings (ASX:TAH), closing 80.2 per cent lower at $1.05. It was followed by shares in Nufarm (ASX:NUF) and Imugene (ASX:IMU).
Commodities and the dollar
Gold is trading at US$1851.36 an ounce.
Iron ore is 0.2 per cent lower at US$135.95 a ton.
Iron ore futures are pointing to a fall of 2.1 per cent.
Light crude is trading $1.27 lower at US$109.02 a barrel.
One Australian dollar is buying 70.85 US cents.
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics
