Market wrap: Budget helps to drag down market 1.3%
Worries about how the Federal Budget might dampen demand for shares helped to drag the Australian market down 1.3% for the week.
With almost all investors now facing a minimum 30% capital gains tax on investment profits, our market was down for four straight sessions as mining companies finally retreated on the back of lower copper prices.
On Friday, the ASX 200 was down 9.90 points, or 0.1% to 8630.80 points even though only two of the 11 sectors were weaker.
Big miners fall off their record highs
Weaker mining shares dragged the materials sector down 3% after copper prices lost some of their heat and gold slumped towards $US4600 an ounce.
Traders attributed the slump in gold to higher inflation numbers in the US, which will probably interrupt the US Federal Reserve’s projected downward rate path for official interest rates. BHP’s (ASX: BHP) amazing week of hitting three consecutive record highs came to an abrupt end as the mining giant’s shares fell 2.6% to $60.46. It was a similar story for Pilbara iron ore counterpart Rio Tinto (ASX: RIO) with its shares ending a four session run of record highs with a 3.2% fall to $185.75.
Steep falls for gold miners Falls in the gold sector were even steeper with Evolution Mining shares’ (ASX: EVN) 5.5% fall to $12.50 a typical example. The sale of 1.75 million shares for $122.5 million by Mineral Resources (ASX: MIN) managing director Chris Ellison was not a good omen for other shareholders, with company shares falling a hefty 7.7% to $64.77.
It was the first on-market disposal by Chris Ellison in nine years and didn’t help to surround the company with a ring of confidence. The weakness among mining stocks even hit the lithium space with Liontown (ASX: LTR) shares down by 6% to $2.35.
Tech shares on the rebound
It was a totally different story for technology shares which came back strongly after a weak session on Thursday. Xero shares (ASX: XRO) followed up a 9% fall on Thursday with a 8.1% rebound to $79.67. WiseTech Global shares (ASX: WTC) jumped by 3.7% to $38.01 while the fast rising Megaport (ASX: MP1) added 2.4% to $12.88 after an impressive 28% rally on Thursday.
The big banks that went into a tailspin after the Budget clampdown on negative gearing led to fears loan growth would disappear enjoyed a muted bounce back on Friday.
Slammed bank shares slowly recovering Commonwealth Bank shares (ASX: CBA) followed up their amazing 10.4% post-Budget dive on Wednesday with a 1.9% rise on Friday to $159.40. ANZ shares (ASX: ANZ) were also stronger, up 1.1% to $35.21, while Westpac shares (ASX: WBC) were up a skinny 0.3% to $35.84 while National Australia Bank shares (ASX: NAB) were up 0.3% to $36.52. There were some interesting company specific moves with shares in Treasury Wine Estates (ASX: TWE) up 1.9% to $4.25 after a big show of confidence from French billionaire Olivier Goudet who lifted his stake in Australia’s biggest wine company by $31 million to take his holding up 0.9% to 9.04%.
Defence goes on the attack Shares in Electric Optic Systems (ASX: EOS) added 4.1% to $8.82 as it prepares to take control of the MARSS defence technology business soon.
MARSS has secured €102 million ($165 million) in new orders this month from an existing Middle East customer. Vicinity Centres shares (ASX: VCX) rose 1.6% to $2.51 after it struck a $400 million deal to acquire the Eastern Creek Quarter retail precinct in western Sydney from Frasers Property.
The deal is due to settle on June 30. Ventia Services shares (ASX: VNT) ran up 2.2% to $6.03 after renewing a maintenance services contract with Yarra Valley Water in a deal valued at $405 million over nine years.
The week ahead
With the continuing strength of the AI story one of the strong points in global markets, Wednesday will be an important day as semiconductor goliath NVIDIA reports its results.
Together with its fellow semiconductor companies which are key suppliers to the AI boom, they have gone for an incredible run with the Philadelphia Semiconductor Sector Index now up 34% over the past month and 153% over the past year.
There are a strong of other US companies reporting in the coming weeks with some the the highlights including Home Depot, Keysight Technologies, Analog Devices, Lowe’s, Intuit, Target, Hasbro, Walmart, Deere and Ralph Lauren.
It is also a busy week for economic releases in the US including housing starts, purchasing managers and jobless claims.
Will interest rates keep rising?
Locally, unemployment figures for April will be the main event but investors will also be closely following a speech by Reserve Bank Assistant Governor Sarah Hunt to watch for any clues about the outlook for the Australian economy and also the last RBA board minutes after it decided to raise the official cash rate by 25 basis points to 4.35%.
There are also some earnings updates by Australian companies including ALS, New Hope, Elders, Catapult, Technology One, James Hardie, Goodman Group, Webjet and Bendigo and Adelaide Bank.
