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Unemployment figure boosts market – perversely

Daily Market Update

Australia’s unemployment rate unexpectedly rose to 3.7 per cent in January, from 3.5 per cent in December, after 11,500 people lost work, according to the Australian Bureau of Statistics  (ABS). Economists had expected the unemployment rate to hold at 3.5 per cent and 20,000 job gains.

Counter-intuitively to many, the share market liked the figure, as it suggested that the RBA might not need to raise rates as aggressively in the coming months as might have been thought. A slightly weaker labour market will ease some of the concerns of inflation becoming entrenched, and boost hopes that the Reserve Bank might be approaching the end of its tightening cycle.

The S&P/ASX 200 lifted 58.1 points, or 0.8 per cent, to 7410.3 on Thursday, while the broader All Ordinaries index added 61.6 points, also 0.8 per cent, to 7,620.7.

  • Among the big miners, BHP was up 18 cents, or 0.4 per cent, to $48.12; Rio Tinto gained 35 cents, or 0.3 per cent, to $123.68; and Fortescue Metals closed 32 cents, or 1.5 per cent, higher at $22.32.

    The energy sector was mixed, with Woodside Energy down 35 cents, or 1 per cent, to $35.00 and Santos down 5 cents, or 0.7 per cent, to $7.01, but Beach Energy was up 2.5 cents, or 1.7 per cent, to $1.53, and Brazilian-based producer Karoon Energy advanced 7 cents, or 3.1 per cent, to $2.33.

    In coal, Whitehaven Coal shed 23 cents, or 2.8 per cent, to $7.96; New Hope Corporation eased 21 cents, or 3.7 per cent, to $5.52; and Yancoal Australia slid 11 cents, or 1.9 per cent, to $5.66

    Among the lithium cohort, Allkem advanced one cent to $12.34, and fellow producer Pilbara Minerals was down 3 cents, or 0.6 per cent, to $4.69; while in the project developers, Core Lithium gained 2.5 cents, or 2.6 per cent, to $1.00; Lake Resources was up 1.5 cents, or 2.3 per cent, to 66 cents; Liontown Resources rose 4 cents, or 3 per cent, to $1.38; and US-based Piedmont Lithium spiked 5 cents, or 5.1 per cent, to $1.04.

    Reporting rolls on

    As reporting season continues, embattled fund manager Magellan reported a 60 per cent decline in interim net profit and a further decline in funds under management, but the shares managed a 6.4 per cent rise to $10.05, seemingly on the grounds that the market expected worse.

    Packaging company Orora surged 43 cents, or 14.8 per cent, to $3.33 after reporting a 7.8 per cent lift in net profit for the six months ended December 31.

    Sonic Healthcare said net profit after tax fell 54 per cent in the first half to $382 million, but the company lifted its interim dividend by 5 per cent, to 42 cents a share. The stock surged $4.14, or 14.3 per cent, to $33.20.

    Super Retail Group unveiled record sales of $1.96 billion for the December half-year, leading to a 30 per cent rise in net profit, to $144 million, and a 26 per cent hike in the interim dividend, to 34 cents a share. In response the shares rose 53 cents, or 4.4 per cent, to $12.50.

    But it was another disappointment from AMP, which turned in a statutory net profit after tax of $387 million for the 2022 full year, up from a loss of $252 million in the previous year, but in doing so, fell short of analysts’ forecasts. The stock sank 17 cents, or 13.4 per cent, to $1.13.

    Wholesale inflation bothers Wall Street

    US markets fell on Thursday after another higher-than-expected inflation measure, this time wholesale inflation, pointed to the Federal Reserve having to hold the line on interest rates. Producer prices were up 0.7 per cent in January, hotter than economists’ consensus expectations for a 0.4 per cent increase.

    The blue-chip Dow Jones Industrial Average retreated 431.2 points, or 1.3 per cent, to close at 33,696.85. The broader S&P 500 index eased 57.2 points, or 1.4 per cent, to 4,090.41, and the tech-heavy Nasdaq Composite index fell 214.8 points, or 1.8 per cent, to close at 11,855.83. Microsoft and Disney contributed the most to the Dow’s decline, down 2.7 per cent and 3.1 per cent respectively. Tesla plunged 5.7 per cent following a vehicle recall.  

    In the bond market, the US 10-year yield crept six basis points higher, to 3.867 per cent, while the more policy-sensitive 2-year yield edged 1.5 basis points higher, to 4.642 per cent.

    In commodities, gold added US$1.03 to US$1,837.52, while the global benchmark Brent crude oil grade lost 73 cents, or 0.9 per cent, to US$84.65 a barrel and US West Texas Intermediate gave up 54 cents, or 0.7 per cent, to US$78.05 a barrel.

    The Australian dollar is buying 68.79 US cents, down from 69.19 US cents at the local close on Thursday.

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