Meanwhile,online marketplace Kogan gained 3.5 per cent despite booking a $24 million half-year loss after the company worked hard to reduce the amount of extra stock it had on hand due to overinvesting in products during COVID-19 lockdowns. Founder and chief executive Ruslan Kogan said the company was emerging from a “turbulent few years” after the rush of pandemic-fuelled sales,which were followed by difficulties and excess inventory once online shopping returned to more normal levels.
The laggards:
The materials sector (down 3.2 per cent) was the heaviest weight on the index,after a crackdown on pollution in China depressed iron ore prices. Pilbara Sands (down 7.3 per sent),Mineral Resources (down 6.4 per cent) and Lynas Rare Earths (down 6.2 per cent) were the biggest large-cap decliners. Heavyweights BHP (down 3 per cent) and Fortescue (down 4 per cent) also dragged down the index.
Local engineering and construction services firm Downer EDI’s shares slumped sharply after it cut its full-year guidance for the second time in three months. Shares in the company fell 23.2 per cent on Monday,to $3.04,after Downer restated its full-year guidance to between $170 million and $190 million.
The lowdown:
IG Australia market analyst Tony Sycamore said the catalyst for the sell-off in Australian markets on Monday was the fall on Wall Street as inflation data stunned to the upside.
“The latest round of hotter-than-expected US economic data has added to concerns that the US economy is not slowing enough to allow the Fed to end its rate-hiking cycle,” he said. “A similar story is also playing out in Australia as hotter-than-expected inflation data push the RBA towards extending its own tightening cycle.”
Sycamore said the weakness in Australian shares was also “compounded by an earnings season skewed towards earnings misses rather than beats and forward guidance,particularly from consumer-facing companies that suggest more challenging times lay ahead.”
On Wall Street,the S&P 500 fell 1.1 per cent to cap its third straight weekly loss. The Dow Jones Industrial Average dropped as many as 510 points before closing down 336 points,or 1 per cent,while the Nasdaq composite lost 1.7 per cent.
US stocks have dropped through February as a stream of reports have shown everything from inflation to the job market to spending by shoppers is staying hotter than expected. That’s forced Wall Street to raise its forecasts for how high the Federal Reserve will have to take interest rates and then how long to keep them there.
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The latest reminder came last Friday after a report showed that the measure of inflation preferred by the Fed came in higher than expected. It said prices were 4.7 per cent higher in January than a year earlier,after ignoring costs for food and energy because they can swing more quickly than others. That was an acceleration from December’s inflation rate,showing the wrong momentum,and it was higher than economists’ expectations for 4.3 per cent.
It echoed other reports from earlier in the month that showed inflation at both the consumer and wholesale levels was higher than expected in January.
Other data out on Friday showed that consumer spending returned to growth in January,rising 1.8 per cent from December.
Such strength paired with the remarkably resilient job market raises hope that the economy can avoid a recession in the near term.
Expectations for a firmer Fed have caused yields in the Treasury market to shoot higher this month,and they climbed further Friday.
The yield on the 10-year Treasury rose to 3.94 per cent from 3.89 per cent late Thursday. It helps set rates for mortgages and other important loans. The two-year yield,which moves more on expectations for the Fed,rose to 4.79 per cent from 4.71 per cent and is near its highest level since 2007.
Tweet of the day:
Quote of the day:
“Three years ago,we would have been ecstatic to be at that price level,” said Woodside chief executive Meg O’Neill,regarding prices for liquefied natural gas which have fallen from the heady levels of 2022 butremain above historic norms.
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With AP