Inflation fears hit tech stocks: ASX closes 0.4% lower

Market Reports

by Melissa Darmawan

Healthcare and tech stocks were sold off as the local bourse fell to a two-week low as soaring bond yields and mounting fears from Shanghai’s lockdown clouded investor’s global outlook on inflation.

China opened the week with consumer and producer prices coming in higher than expected with Wall St and Main St expecting the headline inflation rate to come in at 8.4 per cent from the 7.9 per cent in February which hit a fresh 40 year high.

Investors bought into the precious metal miners as an inflation hedge with Northern Star (ASX:NSM) rising 1.4 per cent to $10.82 while Evolution Mining (ASX:EVN) closed 2.5 per cent higher to $4.50.

The future value of growth stocks like tech spooked investors as a rally in treasury yields puts these stocks under pressure. These concerns have persisted as information tech is sold off for its fifth straight session on the local bourse.

At one point, Zip Co (ASX:Z1P) hit a fresh two-year low though closed 5.7 per cent lower at $1.32. Afterpay-owner Block (ASX:SQ2) released accounts showing that buy now pay later provider’s net loss soared to $345.5 million for the six months ending December 31 of last year from $79.2 million in the prior corresponding period. Block closed 0.4 per cent lower at $163.80.

Declines in Wisetech (ASX:WTC) of 2.2 per cent to $47.34, Appen (ASX:APX) down 3.1 per cent lower at $6.35 while Megaport (ASX:MP1) tumbled 4.7 per cent at $11.92 which didn’t help with trader's sentiment while health players like blood giant CSL (ASX:CSL) falling 1.3 per cent at $261.97 and Resmed (ASX:RMD) tumbled 3.4 per cent to $32.05 pushed its relevant sector to the worst performer of the session.

ANZ Bank (ASX:ANZ) led the falls in the banking circle amid a broker downgrade while NAB (ASX:NAB) shed the least by 0.1 per cent  at $32.94. Macquarie Group (ASX:MQG) bucked the trend, rising 0.6 per cent to $203.13.

The Australian business survey from NAB showed a surprise jump in confidence and conditions as resilient demand offset cost growth however did very little to offset the weak session.

Offshore, China eased lockdowns in some residential compounds though the lift affected areas outside the populated areas. As the country continues with its zero Covid-19 policy, Shanghai authorities are under pressure as disgruntled residents struggle to access food and medical care as containers pile up at ports. The situation prompted the US to order non-essential consulate staff to leave Shanghai and urge Americans to reconsider travel to China.

Meanwhile, stocks on the Shanghai stock exchanged bounced back by 1.1 per cent at time of writing as investors piled into equities on speculation that policy makers will take measures aimed at reviving economic growth. Bets that authorities will take measures have intensified after Premier Li Keqiang issued a third warning about economic growth risks in less than a week, lifting consumer sentiment. The move comes after stocks plunged on Monday as investors climbed the wall of worries on China's worsening Covid outbreak, regulatory uncertainties and rising global interest rates to combat inflation.

At the closing bell, the S&P/ASX 200 was 0.4 per cent or 31 points lower at 7,454.

Futures

The Dow Jones futures are pointing to a fall of 125 points.
The S&P 500 futures are pointing to a fall of 17 points.
The Nasdaq futures are pointing to a fall of 39 points.
The SPI futures are pointing to a fall of 41 points when the market next opens.

Local economic news

Consumer confidence increased by 1.2 points to 94.6 this week after average petrol prices in Australia dropped by around 20 cents per litre last week to $1.74 per litre. The price at the pump is now down around 40 cents per litre since peaking in mid-March at $2.13 per litre as per ANZ and Roy Morgan.

Business conditions surged higher in March and confidence also strengthened. Trading conditions and profitability rose markedly, suggesting demand remains strong, and employment also rose. The improvement was largely driven by the retail sector, which saw conditions rise 23 points, as well as recreation and personal services and finance, business and property as per NAB business survey.

Company news

Bluescope Steel (ASX:BSL) jumped 2.5 per cent to $21.26 amid ETF provider State Street now having a 5 per cent stake in the company according to a regulatory holding.

Iress (ASX:IRE) dropped its plans to sell off its UK mortgages business due to increased global market volatility and declining tech company valuations. Shares closed 1.7 per cent higher at $11.80.

Pendal Group (ASX:PDL) intends to commence an on-market share buyback of up to $100 million following the release of its financial results for the six months to March 31, scheduled for May 10 this year. Meanwhile the fund manager shunned the takeover bid received by Perpetual (ASX:PPT) as it “significantly undervalues” its current and future value and therefore is not in the best interests of shareholders. Shares closed 0.2 per cent lower to $5.29.
Lynas Rare Earths (ASX:LYC) Corp reported a record quarter for the period ending March 31. Lynas delivered record sales revenue of $327.2 million, up from $202.7 million in the prior corresponding period. The company reported record sales receipts of $262 million, up from $151 million in the prior corresponding period. Shares closed 1.4 per cent lower at $9.68.

Amid news that Commonwealth superannuation corporation is in late-stage talks for a 20 per cent stake in Uniti Group (ASX:UNI) as part of its buyout, according to the AFR. Shares rose 2.6 per cent to $4.80.

Broker moves

UBS dropped its price target for Woodside Petroleum (ASX:WPL) by 5 per cent to $32.90 and maintained its neutral rating. The oil major published the Independent Expert's Report for its proposed merger with BHP’s petroleum arm, valuing it up to 19 per cent lower than UBS’ estimate. The fall in the price target is due to the broker’s reduced valuation for two oil fields in West Africa and Mexico. Shares closed flat at $32.06.

Morgan Stanley downgraded ANZ’s (ASX:ANZ) rating to equal-weight from overweight with a price target of $28.60. The broker cites several ongoing challenges including a weaker outlook in New Zealand with falling margins and lower non-interest income set to weigh on revenue this year. The broker believes that the bank has weaker volume growth compared to its peers, reducing its price target by 6 per cent to $28.60 from $30.30. Shares closed 1 per cent lower at $27.42

Macquarie downgraded Nearmap (ASX:NEA) to neutral from outperform with a target price of $1.40. The broker believes that the aerial imagery company is set to face headwinds penetrating the North American market for the claims insurance segment due to being late to the game. Macquarie cited that its competitor EagleView holds strong measuring technology patents compared to the company as Nearmap faces limitations on software integration. Shares closed 3.9 per cent lower to $1.34.

Goldman Sachs has upgraded three companies, including Mineral Resources (ASX:MIN) raised to buy from neutral, shares fell 0.2 per cent lower to $59.16, OZ Minerals (ASX:OZL) to a buy from neutral, shares dropped 1.1 per cent at $25.45 and Sandfire Resources (ASX:SFR) raised to neutral from a sell with shares closing 0.2 per cent higher to $5.54.

Best and worst performers

All sectors closed in the red. The sector with the fewest losses was Materials, down 0.03 per cent. The worst-performing sector was Health Care, down 1.4 per cent.

The best-performing stock in the S&P/ASX 200 was Regis Resources (ASX:RRL), closing 4.7 per cent higher at $2.21. It was followed by shares in Elders (ASX:ELD) and St Barbara (ASX:SBM).

The worst-performing stock in the S&P/ASX 200 was Imugene (ASX:IMU), closing 8.7 per cent lower at $0.21. It was followed by shares in City Chic Collective (ASX:CCX) and Pilbara Minerals (ASX:PLS).

Asian markets

Japan's Nikkei has lost 1.8 per cent.
Hong Kong's Hang Seng has gained 0.3 per cent.
China's Shanghai Composite has gained 1.1 per cent.

Commodities and the dollar

Gold is trading at US$1,957.07 an ounce.
Iron ore is 2.6 per cent lower at US$150.60 a ton.
Iron ore futures are pointing to a rise of 4.1 per cent.
Light crude is trading $2.72 higher at US$93.30 a barrel.
One Australian dollar is buying 74.26 US cents.

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