Australian shares are poised for a modest rebound on Friday after technology stocks lifted Wall Street, although renewed interest rate concerns are likely to remain a key influence on sentiment.
At 6.12am AEST, ASX futures were pointing to a 15-point, or 0.2%, rise at the open following Thursday’s sharp retreat.
The tentative recovery comes after the S&P/ASX 200 suffered its biggest decline in 12 weeks, falling 89.60 points, or 1%, to 9,038.20 as investors responded to stronger-than-expected inflation and a heavy slate of corporate earnings.
All 11 sectors finished lower except healthcare and industrials, extending Wednesday’s 0.4% decline.
Rate rise expectations weigh on market
Wednesday’s inflation figures continued to reverberate through the market, with underlying inflation rising 0.5% in July and the annual trimmed mean measure remaining at 3.6%, rather than easing as economists had expected.
The result prompted several major banks to bring forward expectations for another Reserve Bank of Australia interest rate increase.
Commonwealth Bank now expects a 25-basis-point increase to 4.6% in November, while identifying a risk that the RBA could move as soon as its September meeting.
Deutsche Bank economist Phil O’Donaghoe and National Australia Bank’s Sally Auld have gone further, switching their forecasts to a September increase.
Higher borrowing costs weighed particularly heavily on rate-sensitive areas of the market.
Technology stocks were among the casualties, with Xero falling 2.6%, WiseTech Global losing 3.3% and NEXTDC (ASX:NXT) declining 1.6%.
Real estate stocks also struggled. Goodman Group (ASX:GMG) dropped 0.7%, Scentre Group fell 1.4% and Stockland lost 3.7%.
Financials were mixed but mostly weaker, with Commonwealth Bank down 0.3%, NAB losing 0.7% and ANZ falling 1.3%, while Westpac gained 0.4%.
Miners and retailers retreat
Gold miners came under pressure as expectations for higher rates reduced the appeal of the non-yielding precious metal.
Evolution Mining fell 1.4% and Newmont lost 1.9%, while diversified miners BHP and Rio Tinto declined 1.5% and 0.5%, respectively.
Consumer staples also weakened, with Woolworths down 1.6% and Coles falling 1.2%.
The S&P/ASX Small Ordinaries was hit harder than the broader market, dropping 57.10 points, or 1.59%, to 3,524.20 on Thursday. The index is now around 0.74% lower over the past five sessions.
Against that softer small-cap backdrop, company-specific earnings news drove some of the session’s biggest individual moves.
Qantas rallies as Wesfarmers and Sigma slide
Qantas Airways (ASX:QAN) climbed 4.8% after forecasting revenue growth of between 8% and 10% in the current year, supported by higher airfares.
The airline reported a 13.8% fall in underlying pre-tax profit to $2.06 billion for the year to June as its fuel bill increased by more than $600 million amid disruption from the Middle East conflict.
Rival Virgin Australia gained 6%.
Wesfarmers moved in the opposite direction, falling 4.6% after reporting a 1.8% decline in net profit to $2.87 billion.
Group sales rose 3.4% to $47.3 billion, while profit excluding significant items increased 8.3% to $2.9 billion.
The company also announced Bunnings managing director Mike Schneider will retire in February, with chief customer officer Rachel McVitty to succeed him.
Sigma Healthcare dropped 7.8% as investors digested its first result since completing the Chemist Warehouse combination.
Sales jumped 15.5% to $10.8 billion and profit rose 22.3% to $732.2 million, with weight-loss drugs helping support Chemist Warehouse sales.
Mayne Pharma lost 1.6% after underlying full-year earnings declined 27% to $34.2 million, with management citing disruption from the abandoned $672 million takeover by Cosette Pharmaceuticals.
Ramsay Health Care was one of the session’s standout performers, surging 13.7% after net profit increased 19.3% to $364.1 million on improved cost management and growth in hospital admissions.
Nvidia powers Wall Street higher
US markets offered a more positive lead overnight as Nvidia’s latest results reinforced confidence in the artificial intelligence investment boom.
Nvidia jumped 8.7%, helping the semiconductor index rise 2.3% and pushing the S&P 500 Information Technology sector 3.4% higher.
Software stocks also rallied strongly. Salesforce surged 23% after lifting its annual revenue and profit forecasts and unveiling a new plug-in integrating Anthropic’s Claude artificial intelligence models.
CrowdStrike gained 21% after upgrading its annual revenue guidance and beating second-quarter earnings expectations, while ServiceNow rose 10% and Palo Alto Networks added 13%.
The Dow Jones Industrial Average finished 0.2% higher, the S&P 500 gained 0.7% and the Nasdaq advanced 1.2%.
European markets slide
European markets had their weakest session in a month as political and fiscal uncertainty weighed on French equities ahead of the first presidential debate before next year’s election.
France’s CAC 40 dropped 1.7% to a one-month low, with BNP Paribas, Société Générale and Crédit Agricole falling between 4% and 5%.
European banks were down 1.7% overall.
Pernod Ricard declined 4.6% after annual sales slightly missed expectations amid weaker demand in the US and China.
The FTSEurofirst 300 closed 0.8% lower, while London’s FTSE 100 also shed 0.8%.
US bond yields edged higher ahead of Federal Reserve chair Kevin Warsh’s appearance at the Jackson Hole Symposium on Friday. The US 10-year Treasury yield rose 1 basis point to 4.68%, while the two-year yield increased 1 basis point to 4.24%.
Oil and gold rise
Currency markets were relatively steady.
- The euro was at US$1.1651.
- The Japanese yen at ¥159.37 to the US dollar.
- The Australian dollar gained 0.3% to US$0.7195.
Oil prices moved higher after Washington confirmed it was not holding talks with Iran, reducing expectations for an imminent resumption of Middle Eastern oil flows.
- Brent crude settled 2.1% higher at US$89.70 a barrel.
Base metals were mixed.
- Copper futures were down 0.1% and aluminium was up 0.4%.
- Gold futures gained 0.2% to US$4,664 an ounce ahead of the Federal Reserve chair’s Jackson Hole address.
- Iron ore edged 0.1% higher to US$95.68 a tonne.
Looking ahead
The Australian reporting season continues on Friday with results expected from Harvey Norman, Virgin Australia, Coventry Group, Articore, McMillan Shakespeare, Dicker Data (ASX:DDR), Cobram Estate Olives and PEXA Group.
In the US, investors will also be watching the University of Michigan consumer sentiment survey, although the main global focus will remain on Jackson Hole and any fresh signals on the path for US interest rates.