Aussie shares slumped after an inflation surge accelerated a sell-down sending the local bourse to its lowest close since May last year, shrugging off a remarkable rebound on Wall St. All sectors cratered with losses of more than three per cent in four of the 11 groups, while a two per cent loss was considered mild.
Renewed fears were intensified on the prospect of the Reserve Bank to withdraw its melody around the unlikelihood of hiking interest rates before 2024.
The inflation figures come after the jobless rate fell to its lowest level in 13 years to 4.2 per cent in December. Governor Philip Lowe has repeated many times that he won’t raise interest rates until unemployment has fallen to 4 per cent and wage growth rises to 3 per cent. Unemployment is close to that requirement, but wages growth is only at 2.2 per cent. Economists are betting that in the first board meeting of 2022 next Tuesday, that an interest rate hike is likely to be brought forward, however given that wage growth is only at 2.2 per cent, the likelihood to cease bond purchases is imminent.
The local bourse hit a fresh new eight month low on day three of its losing streak amid mounting tensions between Russia and Ukraine. The US is potentially ready to deploy 5,000 troops to Europe to help out with Ukraine and Ukraine's allies, with over 100,000 Russian soldiers near the border of Ukraine.
Energy was the worst performer despite the market fundamentals showing that the price of crude is set to move higher. Traders priced in the impact on the cost of energy if Russia invades Ukraine. Europe imports a large percentage of gas from Russia, while Russia exports 70 per cent of gas to Europe. With the two unfortunately in an awkward interdependence with 30 per cent or more of Russia’s GDP linked to oil and gas, the push and pull has major economic consequences and creates turmoil in global markets.
Diversifying into new markets is a key objective for Russia as the European Union reduces its dependence on fossil fuel supplies. Prior to the recent gas supply cuts by Russia, their energy plans earmarked an increase in exports to China where demand is growing. If President Putin decides to back down from this, the colour green will be back on the cards.
Fortescue Metals (ASX:FMG)
sank 5 per cent at $19.50 after the miner shipped 47.5 million tonnes of iron ore in the first half of financial year 2022, marking a 3 per cent increase from the corresponding period and a record for a half year. Its costs and debt level were in line, while financial year 2022 production guidance was maintained.
Rio Tinto (ASX:RIO)
fell 0.8 per cent at $107.80 despite inking a deal with the Mongolian government to start the underground expansion of the giant Oyu Tolgoi copper and gold mine in the Gobi Desert. The agreement includes forgiving a $2.4 billion loan to Mongolia's state-owned mining company that has a 34 per cent stake in the project, and a pledge to increase cooperation between the project's partners. Meanwhile, BHP Group (ASX:BHP)
fell 1.3 per cent at $45.03.
Tonight, the UK court is set to vote on BHP's unification proposal while on Wall St, earnings season continues with Microsoft among the many to release the figures. This could put the tech heavy Nasdaq under pressure if figures disappoint. The local market is closed tomorrow for Australia Day and we will wake up to the outcome from the Federal Reserve two-day meeting.
At the closing bell, the S&P/ASX 200 slumped 2.5 per cent or 178 points lower at 6,962.Local economic news
The annual inflation rate rose to 3.5 per cent in the fourth quarter of 2021 from the prior quarter of 3.0 per cent, above market estimates of 3.2 per cent. On a quarterly basis, consumer prices went up 1.3 per cent in the December quarter, the most in five quarters, accelerating from a 0.8 per cent gain in the third quarter.
The annual trimmed inflation, the figure the Reserve Bank watches, rose to 2.6 per cent, up from 2.1 per cent in the September quarter, to the highest since 2014 according to the Bureau of Statistics.
NAB business survey conditions slipped 8 points while confidence fell 12 points in December.
ANZ and Roy Morgan consumer confidence rose from 97.9 to 100.1 points over the week after sentiment rallied off the back of unemployment falling its lowest level in 13 years and a drop in Covid-19 cases.Company news
Auckland Airport (ASX:AIA)
announced a 12-month delay on the first price reset in response to uncertainty in the aviation market amid the pandemic. Shares closed 1 per cent higher at $6.85.
is committed to entering agreements with KORE Power as part of an ongoing joint effort to strengthen the North American battery supply chain. Shares tumbled 8 per cent to $7.58.
Zip Co (ASX:Z1P)
confirmed it is in discussions with US fintech Sezzle regarding a potential acquisition. Shares closed 2.1 per cent lower at $3.21.
reported an increase in total sales thanks to a strong demand in the lead up to Christmas while Covid-19 hit sales after Christmas. Shares closed 6.8 per cent higher at $0.40.
Fortescue Metals (ASX:FMG)
shipped 47.5 million tonnes of iron ore in the first half of FY22, up 3 per cent from the corresponding period and a record for a half year. Shares fell 5.6 per cent to $19.38.
Beach Energy (ASX:BPT)
reported 5.3 million barrels of oil equivalent, down 7 per cent from the prior quarter, due to a combination of natural field declines and maintenance. Shares closed 7.8 per cent lower at $1.30.
lifted sales by 32 per cent in the first half of financial year 2022 despite global shortages and supply chain disruptions. Shares soared 16.4 per cent to $9.74.
St Barbara (ASX:SBM)
reported its December quarter with gold production at 65,523 ounces, in line with the prior quarter. Shares fell 5.1 per cent to $1.30.Futures
The Dow Jones futures are pointing to a fall of 320 points.
The S&P 500 futures are pointing to a fall of 60 points.
The Nasdaq futures are pointing to a fall of 271 points.
The SPI futures are pointing to a fall of 223 points when the market next opens.Best and worst performers
All sectors closed in the red. The sector with the fewest losses was Consumer Staples, down 1.1 per cent. The worst-performing sector was Energy, down 4.1 per cent.
The best-performing stock in the S&P/ASX 200 was Codan (ASX:CDA)
, closing 16.9 per cent higher at $9.78. It was followed by shares in The A2 Milk Company (ASX:A2M)
and Life360 (ASX:360)
The worst-performing stock in the S&P/ASX 200 was Liontown Resources (ASX:LTR)
, closing 9.9 per cent lower at $1.36. It was followed by shares in Chalice Mining (ASX:CHN)
and PointsBet Holdings (ASX:PBH)
Japan's Nikkei has lost 2.2 per cent.
Hong Kong's Hang Seng has lost 1.4 per cent.
China's Shanghai Composite has lost 1.2 per cent.Commodities and the dollar
Gold is trading at US$1842.16 an ounce.
Iron ore is 2.7 per cent lower at US$133.70 a ton.
Iron ore futures are pointing to a rise of 0.5 per cent.
Light crude is trading $0.36 higher at US$83.67 a barrel.
One Australian dollar is buying 71.38 US cents.