Source : THE AGE NEWS
By Staff reporters
The Australian sharemarket remains in the red at lunchtime on Thursday after Wall Street slumped overnight under the weight of pressure from the bond market, where Treasury yields climbed on worries about the US government’s spiralling debt and other concerns.
The S&P/ASX 200 lost 42.60 points, or 0.5 per cent, to 8344.20 as of 12.40pm AEST, ending its two-day winning streak that was driven by the Reserve Bank’s latest interest rate cut on Tuesday. Nine of the bourse’s 11 sectors declined, led lower by property stocks, retailers, tech stocks and banks. The ASX added 0.5 per cent on Wednesday.
The Australian dollar ground higher overnight. It was fetching 64.42 US cents at 12.43pm AEST.
Wall Street slumped overnight, setting the scene for losses on the Australian market.Credit: AP
Financial stocks weighed on the local market. Commonwealth Bank – the nation’s biggest bank and also the biggest stock on the ASX – dropped 1.5 per cent, having touched a fresh all-time high during Wednesday’s session. National Australia Bank was down 1.5 per cent, Westpac lost 0.6 per cent, and ANZ Bank is flat. Investment banking giant Macquarie Group shed 1.8 per cent.
Energy stocks also retreated, following oil prices lower as higher US crude stockpiles reinforced worries about an oversupplied market, with geopolitical concerns also in focus. Oil and gas giants Woodside and Santos shed 1.5 per cent and 1.6 per cent, respectively, whilst refiner Ampol dropped 2.1 per cent. West Texas Intermediate fell toward $US61 a barrel overnight after shedding almost 2 per cent over the previous two sessions, with Brent crude closing below $US65.
Along with energy stocks, some of Wednesday’s other big winners – defensive utilities and healthcare stocks – declined, yet the renewed risk-off sentiment made investors also avoid cyclical sectors such as tech stocks and businesses dependent on consumers’ discretionary spending such as retailers. The ASX’s two biggest tech stocks, WiseTech Global and Xero, lost 1.1 per cent and 0.8 per cent, respectively. Bunnings and Kmart owner Wesfarmers was down 0.6 per cent, and electronics retailer JB Hi-Fi shed 0.4 per cent.
Real estate investment trusts, often viewed as an alternative to bonds with their annuities-style rental incomes, declined as bond yields rose. Warehouse and data centre owner Goodman Group fell 0.8 per cent, while the big three shopping centre landlords Scentre (down 1.6 per cent), Stockland (down 2 per cent) and Vicinity (down 0.6 per cent) all fell.
Meanwhile, materials were in the green, bolstered by yet another strong performance from gold miners Northern Star Resources (up 4 per cent), Evolution Mining (up 1.4 per cent) and Newmont (up 2.5 per cent) as spot prices for the safe-haven investment gold continued to rise.
Premium wagyu producer Australian Agricultural Company’s (AACo) share price slid 1 per cent despite revealing improvements in operating profit and revenue.
Chief executive David Harris said Trump’s tariffs haven’t had a significant impact on the business to date, with global demand for beef set to increase as domestic beef production in the Northern Hemisphere comes under pressure.
However, one consequence of heightened global demand for Australian beef is that it may reduce supply for Australian consumers, who have been enjoying relatively affordable prices.
“Beef prices in Australia are still partly contingent on that global supply demand. And so as those global prices improve, I think you will see more product leave the shores, which could certainly put domestic prices under pressure.”
Overnight on Wall Street, the S&P 500 fell 1.6 per cent for a second straight drop after breaking a six-day winning streak. The Dow Jones lost 1.9 per cent, while the Nasdaq composite sank 1.4 per cent.
Bitcoin briefly hit an all-time high after the advancement of stablecoin legislation in the US stoked hopes of regulatory clarity for cryptocurrencies under President Donald Trump. The largest cryptocurrency climbed as much as 2.7 per cent to a record $US109,856, before paring much of its gains when broader financial markets retreated.
US stocks had been drifting only modestly lower early in the day, after Target and other retailers gave mixed forecasts for upcoming profits amid uncertainty caused by Trump’s trade war. The market then turned sharply lower after the US government released the results for its latest auction of 20-year bonds.
The government regularly sells such bonds, which is how it borrows money to pay its bills. In this auction, the US government had to pay a yield as high as 5.047 per cent to attract enough buyers to lend it a total of $US16 billion ($24.9 billion) over 20 years.
That helped push up yields for all kinds of other Treasurys, including the more widely followed 10-year Treasury. Its yield climbed to 4.59 per cent from 4.48 per cent late Tuesday and from just 4.01 per cent early last month. That’s a notable move in the bond market.
“Bonds finally appear to be getting equities’ attention,” according to Jonathan Krinsky, chief market technician at BTIG.
Treasury yields have been on the rise in part because of concerns that tax cuts under consideration in Washington could pile trillions of more dollars onto the US government’s debt. Concerns are also still brewing about how much Trump’s tariffs will push up on inflation.
Moody’s Ratings became the last of the three major ratings agencies last week to lower the US government’s credit rating on concerns it may be heading toward unsustainable debt levels.
“We do not think that the downgrade matters by itself,” Bank of America strategists wrote in a research report, “but it has served as a wake-up call for those investors who had been ignoring the ongoing fiscal discussion.”
On Wall Street, Target sank 5.2 per cent after the retailer slashed its earnings forecast. It felt some pain from boycotts by customers after it scaled back many diversity, equity and inclusion initiatives following criticism by the White House and conservative activists.
