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Resources, energy drag market lower

Daily Market Update

With the worst losses in two years for the ASX’s mining and energy sectors, there was no way that the Australian share market’s major indices were gaining ground yesterday, and so it unfolded. 

The mining sub-index slid 5.3 per cent, its worst day since a 6.8 per cent fall on May 1, 2020, while the energy marker dropped 6.3 per cent in its worst day of losses since double-digit slides in March 2020. Given this, it was no surprise that the S&P/ASX 200 fell 105.3 points, or 1.6 per cent, to 6,469.4. The broader All Ordinaries index was down 121.2 points, or 1.8 per cent, to 6.667.5. 

Some of the recent resources high-flyers had their wings melted. In coal, Whitehaven Coal slid $1.29, or 14 per cent, to $7.91; New Hope Corporation lost 93 cents, or 14.7 per cent, to $5.40; Coronado Global Resources fell 21 cents, or 12.3 per cent, to $1.49; and Stanmore Resources retreated 21 cents, or 9.6 per cent, to $1.98. In the lithium space, producer Allkem lost $1.00, or 6.7 per cent, to $13.86, and fellow producer Pilbara Minerals dropped 44 cents, or 9.1 per cent, to $4.41; while rare earths miner Lynas Corporation gave up 47 cents, or 6 per cent, to $7.39. Graphite producer Syrah Resources dropped 35 cents, or 18.3 per cent, to $1.56 after telling the market that operations at its Balama graphite project in Mozambique had been interrupted by illegal industrial action.

On the bulk mining front, BHP lost $1.97, or 5.2 per cent, to $36.20, and Rio Tinto fell $5.22, or 5.6 per cent, to $87.78, while iron ore heavyweight Fortescue Metals eased 82 cents, or 4.9 per cent, to $15.94. 

Energy stocks were also hit as oil prices continued to decline, with Brent crude falling nearly 2 per cent to a nine-month low of $US84.75 a barrel. Santos fell 54 cents, or 7.3 per cent, to $6.88; Woodside Energy slid $1.58, or 5 per cent, to $30.20; Beach Energy ended 11 cents, or 7 per cent, at $1.47; and Brazil-based producer Karoon Energy plunged 19 cents, or 9.4 per cent, to $1.79.

Green shoots amid red splatter

There was also trouble in the industrial stocks. IT services management company Link Group lost 26 cents, or 7.9 per cent, to $3.05 after a court dismissed the proposed acquisition by its Canadian technology company suitor Dye & Durham, by way of a scheme of arrangement, on Friday. Horticulture company Costa Group plunged 36 cents, or 14.2 per cent, to $2.18 after announcing that its chief executive and managing director, Sean Hallahan, would step down with effect from Monday.

The big banks held up reasonably well, with CBA down just the 3 cents at $93.61 and NAB unchanged on the day, at $29.35, while ANZ dropped 34 cents, or 1.5 per cent, to $23.04 and Westpac declined 24 cents, or 1.1 per cent, to $21.18. Macquarie Group lost $2.05, or 1.2 per cent, to $163.52, while Telstra lost just one cent, to $3.76. 

There were advances amid the red ink. Treasury Wines gained 3 cents to $12.58; Wesfarmers added 78 cents, or 1.8 per cent, to $44.06; Woolworths gained 81 cents, or 2.4 per cent, to $34.70; and Coles advanced 32 cents, or 2 per cent, to $16.66.

Afterpay’s owner Block, Inc. gained 80 cents, or 1 per cent, to $85.00; tech star Altium added $1.11, or 3.3 per cent, to $35.01; and global medical device leaders ResMed and Cochlear also had a good Monday, with ResMed up 92 cents, or 2.9 per cent, to $32.96 and Cochlear advancing $5.78, also 2.9 per cent, to $202.34.

Tough night on US markets

In the US, the S&P 500 marked a new closing low for 2022 and the Dow Jones Industrial Average slipped into a bear market as interest rates surged and the global currency turmoil continued. The S&P 500 declined 38.2 points, or 1 per cent, to 3,655, falling below its June closing low of 3,666.8. The 30-stock Dow Jones Industrial Average retreated 329.6 points, or 1.1 per cent, to 29,260.8, taking its loss from its January high to 20.4 per cent — into bear market territory. The tech-heavy Nasdaq Composite index fell 65 points, or 0.6 per cent, to 10,802.9 points; for 2022 so far, the Nasdaq is down 31.8 per cent.

Bond yields surged, with the 10-year Treasury yield topping 3.9 per cent at one point, marking its highest level since 2010. The 2-year Treasury note, which is considered to be particularly sensitive to Federal Reserve policy, saw a yield above 4.3 per cent at one point, the highest level since 2007.

The British pound dropped to a record low against the US dollar on Monday, falling 4 per cent at one stage to bottom at US$1.0382. Sterling has regained levels above US$1.065 on speculation that the Bank of England may have to lift rates more aggressively to get on top of inflation. The Australian dollar set a fresh two-and-a-half-year low of 64.59 US cents, sending the same message to the Reserve Bank of Australia.

Gold is down US$19.17, or 1.2 per cent, to US$1,624.92 an ounce, while Brent crude oil continues its fall, down another US$2.09, or 2.4 per cent, to US$84.06 a barrel, with West Texas Intermediate down 5 cents at US$76.66 a barrel. 

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