Tech tumble sparks sell-off contagion: ASX closes 0.1% lower

Market Reports

by Melissa Darmawan

The tech blow intensified as shares in the sector accelerated to session lows, ending the local bourse’s two-day winning streak. The sell-off spilled over into other sectors with gains in utilities, materials and communication services eclipsed by broader losses.

Facebook parent Meta tanked over 20 per cent in after hours trade on Wall St as the social networking platform missed Wall St’s expectations on its disappointing fourth quarter earnings. The tech sell-off transcended to the Australian sharemarket on a day after Wall St climbed for a fourth day. Afterpay owner Block (ASX:SQ2) weighed, plummeting 9.8 per cent at $145.80.

For the year, the ASX 200 is down 6.7 per cent after a whipsaw January as markets readjust to the “new normal” without the help of monetary and fiscal stimulus that helped bolster market performances. After slipping technically into correction territory last week, shares are attempting to climb higher.

Adding to the volatility is the start of February reporting season, as investors continue to climb the wall of worries about the impact of rising interest rates to combat inflation, the supply chain woes on profit results, and mounting geopolitical tensions.

Furniture chain Nick Scali (ASX:NCK) posted a 17.4 per cent tumble in its first-half profit to $33.5 million. Shares closed 1 per cent higher at $14.54. Continued supply chain disruptions, rising freight costs and a slump in store traffic due to the Omicron variant of Covid-19 crushed its sales and earnings for the period, but profits were up about 75 per cent compared to pre-pandemic which was a beat for investors. The company declared a $0.35 cent dividend to be paid at the end of March.

The nation’s oldest bank, Westpac (ASX:WBC) delivered a $1.82 billion statutory net profit for the December quarter. The bank flagged a three year plan to decrease costs and unveiled its new management structure, but warned shareholders about the prospect of a shrinking net interest margin in a tough competitive environment. Shares closed 2.3 per cent higher at $21.07. A significant increase in the contribution from its treasury unit was the major driver of the result with costs tracking better than expected, down 6 per cent on the quarterly average of the second half of financial year 2021.

Aristocrat Leisure's (ASX:ALL) bid for UK listed Playtech fell through after British shareholders of the gambling software company rejected the $3.9 billion deal. Aristocrat needed approval from 75 per cent of Playtech shareholders with the votes coming in less than 55 per cent of that according to Reuters. Shares closed 0.5 per cent lower at $41.09.

Agricultural products company Nufarm (ASX:NUF) had a blockbuster session, surged 20.2 per cent to $5.59 after posting a revenue jump. December-quarter revenue jumped 36 per cent, putting it on track to deliver revenue and earnings growth for the year ending June 30. The performance was attributed to “favourable weather conditions” and strong customer demand in all regions. However, the company also flagged increasing logistic challenges and high cost pressures around raw materials in the second half.

Elsewhere, Telstra (ASX:TLS) rose 1.3 per cent at $4.03 amid a broker note from Ords lifting its target price to $4.90 from $4.85. The broker reiterated its buy recommendation following the two major projects unveiled on Wednesday. Factoring in the increased earnings and incremental capital expenditure, Ords' valuation has risen by a modest 2 per cent. It means significantly more to the InfraCo business which the telco plans to monetise via a partial selldown, and potentially signals more long-term growth opportunities for the company.

Iron ore giants extended its gains with Fortescue Metals (ASX:FMG) up 3.3 per cent to $21.13, Rio Tinto (ASX:RIO) rose 2.4 per cent to $114.14 while BHP (ASX:BHP) closed 3.1 per cent higher to $47.05 amid market participants adjusting their portfolios following its recent share unification on the ASX.

Tonight market participants await rate outcomes from the European Central Bank (ECB) and the Bank of England. The Bank of England is expected to deliver another interest rate hike while the ECB is expected to keep its tune that a rate hike is unlikely this year. Let’s see if the inflation print of 5.1 per cent in January on an annualized basis spurs a change in tone.

At the closing bell, the S&P/ASX 200 was 0.1 per cent or 10 points lower at 7,078.

Local economic news

December building approvals surged 8.2 per cent, seasonally adjusted versus a fall of 1.1 per cent expected by economists, driven by an increase in approvals for private sector dwellings excluding houses, which rose 27.4 per cent, though private sector house approvals remained subdued, falling 1.8 per cent in December, following a 1.6 per cent decline in November.

While approvals for private houses have fallen from all-time highs, the series remains at historically elevated levels, with the December result 20.5 per cent higher than the pre-pandemic level in December 2019.

Meanwhile, the nation’s trade surplus reduced to $8.4 billion versus an expectation of $9.8 billion, while exports rose 1 per cent and imports increased by 4 per cent buoyed an increased demand in metal ores and minerals.

Futures

The Dow Jones futures are pointing to a fall of 8 points.
The S&P 500 futures are pointing to a fall of 41 points.
The Nasdaq futures are pointing to a fall of 327 points.
The SPI futures are pointing to a fall of 1 point when the market next opens.

Best and worst performers

The best-performing sector was utilities, up 1.6 per cent. The worst-performing sector was information technology, down 5.9 per cent.

The best-performing stock in the S&P/ASX 200 was Nufarm (ASX:NUF), closing 20.2 per cent higher at $5.59. It was followed by shares in Insignia Financial (ASX:IFL) and Fortescue Metals Group (ASX:FMG).

The worst-performing stock in the S&P/ASX 200 was Novonix (ASX:NVX), closing 14.7 per cent lower at $6.57. It was followed by shares in Block (ASX:SQ2) and Zip Co (ASX:Z1P).

Asian markets

Japan's Nikkei has lost 1.1 per cent.
Hong Kong's Hang Seng is closed due to Chinese New Year.
China's Shanghai Composite is closed due to Chinese New Year.

Commodities and the dollar

Gold is trading at US$1806.56 an ounce.
Light crude is trading $0.33 lower at US$87.93 a barrel.
One Australian dollar is buying 71.25 US cents.

Are you a 708 sophisticated investor?

A sophisticated investor is defined under Section 708 of the Corporations Act (net assets of $2.5 million or annual incomes in excess of $250,000).

They are eligible to receive information regarding wholesale investment opportunities that are not available to regular or retail investors.

Please subscribe if you would like to be alerted to these types of opportunities.