The Australian sharemarket crawled to the bell on Friday and the slow momentum is expected to continue this morning.
Stocks were weighed down by predictions that the price of iron ore will fall further and nothing changed over the weekend. Iron ore slid to $US107.21 a tonne.
The S&P/ASX200 finished 0.76% lower to 7,403.7 for the day on Friday, pushing the index down a small 2.9 points for the week overall.
Fortescue Metals Group (ASX:FMG) Limited declined the most on Friday, losing 11.5% for the session to $15.27 and earning a downgrade from UBS.
Rio Tinto Limited finished the day 4.7% lower to $98.80 and BHP Group Ltd dropped 3.4% to $39.06.
Gold stocks struggled as well as the price of gold declined, with Newcrest Mining Ltds highlighting the fall down 3.1% to $23.78.
The defiant stock last week was Atlassian (NASDAQ:TEAM) Corporation PLC, whose market cap broke through the $US100 billion mark, lifting the personal wealth of its Australian founders to $US23 billion each.
Here’s what we know:
- Iron ore on Friday fell 5.4% to a 14-month low of $US100.80 a tonne.
- The Australian dollar is lower at US72.83 cents.
- The Brent crude price fell by US33 cents or 0.4% to US$75.34 a barrel. Over the week, Brent crude was up by 3.3% and US crude lifted 3.2%, its fourth straight weekly gain.
- Nickel was down -0.1% giving up early gains in the trading session as supply fears resurfaced after top supplier Indonesia announced plans to ban or tax ferronickel exports.
- Lead fell by 1.3%. For the week, lead dropped 7%.
- Copper lost 0.4% and fell 3.9% for the week.
- Tin lifted 0.7%. and 2.1% for the week.
- Spot gold was trading near US$1,754 an ounce at the US close.
Australian market
What’s going on with our banks and the financial sector overall? We asked Wealth Within analyst and founder Dale Gillham.
“According to the RBA’s September report on the Australian economy and financial markets, the profitability of Australia’s banks has been falling since the GFC. The research looks at the return on shareholder equity after tax and minority interests from just prior to the 1987 stock market crash until now.
“According to the RBA, Australia’s major banks peaked at 20% profitability before falling away after the GFC to now be under 10%, which is below the level prior to the 1987 crash. To put this into context, historically over the last 30 years, the bank’s profitability has floated a few per cent above or below 15%, which has underpinned the growth in the share price of the big 4 banks over this time.
“Following the GFC, Australia’s banks rose strongly until 2015 and during that time profitability stayed strong. However, changes to the industry, the royal commission into banking and new regulation has placed challenges on the industry, which has caused not only the share price of banks to fall but also their profitability.
“Eventually things stop falling and start to rise and the big four banks have moved up since their COVID lows in March of last year with CBA leading the charge moving to a new all-time high. That said Westpac, NAB and ANZ are still well below their 2015 highs. So, does this spell opportunity for those looking for good long-term growth?
“As the Australian economy opens up again and gets back to business as usual, I believe banking profits will start to rise. However, other Australian banks may not be so lucky as their profits have been eroding since the early 1990s and have been below the big four since prior to the GFC. That said, contrary to the big four, their current profitability is slightly above where it was after the GFC, so it is worth keeping an eye on these stocks.
“Over the long term, I believe there is good value in the Australian financial sector and our banks will get back to doing what they do best, which is to make money for their shareholders.”
Australian indices
- ASX 200 fell 0.76% to 7,403.70
- ASX24 futures fell 0.9% to 7,302
- S&P/ASX Small Ordinaries fell 0.59% to 3,519.60
- All Ordinaries fell 0.73% to 7,702.90
US markets
The slow start to the ASX this morning will be, in part, due to Wall Street’s Friday finish.
It was another losing week for equities in the US, with markets looking ahead to a pending Federal Reserve decision that will address fading market momentum.
“The bull run is getting tired,” said FHN Financial’s Chris Low.
“The economy is slowing down, inflation is running hot and the Fed is very likely to close the spigots,” Low said.
Highlighting the fall was the tech-rich Nasdaq Composite Index.
Shares of Facebook dropped 2.2%, Alphabet fell 2%, Apple was down 1.8%) and Microsoft was also down 1.8%.
US indices
- Dow Jones fell 0.5% to 34,584.88
- S&P 500 fell 0.9% to 4,432.99
- Nasdaq fell 0.9% to 15,043.97
European markets
European share markets were also down on Friday led by mining giant Anglo American, which tumbled 8.1% after price target downgrades from both UBS and Morgan Stanley (NYSE:MS).
European indices
- STOXX 600 fell 0.88% to 461.84
- German Dax fell 1.0% to 15,490.17
- UK FTSE fell 0.9% to 6,963.64