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‘Deeply pessimistic’ consumer confidence weighs on ASX
By Millie Muroi
Welcome to your five-minute recap of the trading day, and how experts saw it.
The numbers:
Consumer stocks and real estate investment trusts (REITs) held the Australian sharemarket back on Tuesday after the latest consumer confidence data revealed a dip in sentiment.
The S&P/ASX 200 finished up just 1.9 points, or 0.03 per cent, at 7311.1, even as healthcare and information technology stocks gained after a positive lead from Wall Street.
Wall Street made a strong start to the week, but the ASX was less convincing.Credit: AP
Consumer confidence data from Westpac showed that sentiment remained “deeply pessimistic”, dipping 0.4 per cent in August, with sentiment among consumers with a mortgage down a massive 7.2 per cent despite the RBA’s two recent rate hike pauses.
The lifters
James Hardie Industries was the biggest large-cap advancer, soaring 14.4 per cent despite reporting a 3 per cent drop in net profit for the three months to June and seeing an uncertain outlook in its major markets. Investors were reassured by the company’s ability to bolster margins through price increases and cost reductions as sales volumes dropped.
Healthcare (up 0.6 per cent) was the strongest sector on the local bourse as CSL gained 1 per cent and Pro Medicus lifted 0.7 per cent.
Information technology companies (up 0.2 per cent) were also stronger, as Xero gained 0.2 per cent, WiseTech added 0.2 per cent and data centre operator NEXTDC added 0.2 per cent.
The laggards
Meanwhile, REITs (down 0.2 per cent) were among the weakest companies on the index, as shopping-centre owner Vicinity shed 1.6 per cent, Lendlease lost 1 per cent and Charter Hall declined 0.6 per cent.
Australia’s largest department store, Myer, tumbled 14 per cent after the retailer said its sales growth had practically ground to a halt in the six months to the end of July, as shoppers shut their wallets amid record-high interest rates and rising cost-of-living pressures.
Consumer staples (down 0.3 per cent) also weighed on the index, with Treasury Wine Estates down 1.5 per cent) and supermarket giants Woolworths and Coles losing 0.2 per cent and 0.4 per cent, respectively.
Lithium miners IGO (down 3.4 per cent) and Allkem (down 3.4 per cent) were the biggest large-cap decliners.
The lowdown
IG Australia market analyst Tony Sycamore said it was a disappointing session for the S&P/ASX 200 after a series of soft earnings reports and dour economic data.
“The RBA’s on-hold decision last week and softer inflation reading last month were expected to fuel a bounce in today’s consumer confidence release,” he said. “However, it surprisingly slipped to remain in deeply pessimistic territory as households strained under cost-of-living pressures.”
Sycamore also pointed to trade data from China, which showed exports fell for a third straight month in July.
Meanwhile, he said the health sector bounced back, led by CSL ahead of its earnings report next Tuesday.
Elsewhere, stocks climbed in New York as Wall Street’s big rally for the year kicked back into gear following a brief hiccup.
The S&P 500 rose 0.9 per cent to 4518.4 and recovered more than a third of its loss from last week. The Dow Jones rallied 1.2 per cent and the Nasdaq composite added 0.6 per cent.
Berkshire Hathaway shares rose 3.6 per cent and were a major force lifting the market after the company run by famed investor Warren Buffett reported stronger profit and revenue for the spring than analysts expected.
IG Market’s list of most traded shares. Monthly volume traded on the IG share trading platform by July 31.
Corporate profits have been mostly beating forecasts as the season for reporting results from April through June enters its tail end. Nearly four out of five companies in the S&P 500 have topped expectations so far, according to FactSet. But they’re still on track to report their sharpest drop in profit since the summer of 2020, when the pandemic was pummelling the global economy.
Meanwhile, inflation has been the key to Wall Street’s big moves in recent years after soaring to its worst level in a generation. Since hitting a peak last summer, inflation has been cooling steadily. That has raised hopes the Federal Reserve may be done with its drastic hikes to interest rates.
Oil prices have perked up recently. The price of a barrel of US crude added roughly $US10 through July to top $US80, though it slipped 88 cents to $US81.94 on Monday.
On Thursday, the US government will release the latest monthly update on inflation, and economists are forecasting it will show a 3.3 per cent rise in prices from year-ago levels. That would be an acceleration from June’s inflation rate.
In the bond market, yields ticked higher after jumping last week and putting pressure on the stock market. The yield on the 10-year Treasury rose to 4.09 per cent from 4.04 per cent late on Friday. It helps set rates for mortgages and other important loans.
The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.77 per cent from 4.76 per cent.
Tweet of the day
Quote of the day
“We continue to tightly manage costs, inventory and cash to ensure we have a strong balance sheet as we begin [the new financial year], where we expect the ongoing uncertainty around the macroeconomic environment to persist,” said Myer chief executive John King.
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