Weekly Wrap: Political Uncertainty Causes a Pullback from Record Highs
Political uncertainty led to a weaker Australian share market on Friday as investors went back to gold and jumped off energy and technology shares.
With a meeting between Prime Minister Anthony Albanese and President Donald Trump due in the coming week, even shares in critical minerals miners fell as extreme uncertainty surrounded what the meeting might hold.
Mr Albanese has been making moves to position Australia as an important supplier of critical minerals as a bargaining chip to use against tariffs and an insurance policy against possible Chinese export restrictions.
By the close of trade the ASX 200 Index had lost 0.8% or 73.1 points to 8,995.3 points – well short of the record high above 9,100 points set on Thursday.
Despite that retracement, the market still managed to rise 0.4% for the week.
Much of the market action happened around commodities as investors continued to worry about stressed credit markets and continuing tariff fights between China and the US.
Gold Shines Yet Again
Gold miners were stronger on the back of a rising gold price to a peak of US$4,378.69, with shares in Newmont (ASX: NEM) up 2.9% to $149.96, and Northern Star (ASX: NST) up 2.3% to $26.05, while shares in Evolution Mining (ASX: EVN) jumped 1.9% to $11.67.
For miners of so-called critical minerals including copper, lithium and rare earth metals there were plenty of share price falls as investors fretted that the first face to face meeting between Albanese and Trump could head south, given the focus on critical minerals.
Critical Minerals Wobble
Some of the movers included shares in Lynas Rare Earths (ASX: LYC) down 5.7% to $19.24 and Iluka (ASX: ILU), which fell 2.4% to $8.10 after it withdrew its sales forecast due to uncertainties around demand from a key customer, Venator.
Uranium producer and explorer Paladin Energy (ASX: PDN) saw its shares fall 6.8% to $9.20.
Some investors are concerned about the ploy to use a potential Australian critical minerals stockpile as a lever to get a favourable trade deal, thinking the strategy might backfire.
The big miners headed in different directions with the continued Chinese price negotiations helping to send shares in BHP (ASX: BHP) down 0.4% to $43.60.
For the other big iron ore players it was better news with shares in Rio Tinto (ASX: RIO) up 1.3% to $130.88 while shares in Fortescue (ASX: FMG) up 1.9% to $20.18.
Oil Price continues to Fall
Trump’s continuing pressure on Russian oil exports also caused energy stocks to lose ground, with Woodside (ASX: WDS) and Santos (ASX: STO), shedding more than 2.6% and 3.3% respectively.
Overall energy stocks fell 2.8%, after global crude oil prices fell after US President Donald Trump agreed to meet with Russia’s Vladimir Putin in Hungary next week in hopes of resolving the war in Ukraine.
The war has seen the United States try to cut off purchases of Russian oil.
Technology stocks were also weaker, with family-tracking app Life360 (ASX: 360) one of the worst hit, losing 8% to $45.54.
It wasn’t a pretty picture for the financials either with shares in international insurer QBE (ASX: QBE) losing 9.3% to $19.52.
The big banks were mainly weaker, led down by National Australia Bank (ASX: NAB) and Westpac (ASX: WBC), which both shed more than 0.8%, although market leader Commonwealth Bank (ASX: CBA) managed to add 0.1%.
The week ahead
Obviously, the scheduled maiden face to face meeting between scheduled maiden face-to-face meeting between Prime Minister Anthony Albanese and President Donald Trump will be a big factor in the coming week for sheer unpredictability.
It could be anything from a cancellation, a total disaster or triumph or a brief catch-up that doesn’t cover the meatier issues around trade and AUKUS.
Markets hate uncertainty and there is little in life less certain than a meeting with President Trump – just ask Ukranian leader Volodymyr Zelenskyy how badly such a meeting can go!
US Inflation holds the key for Rate Falls
There are some economic releases due but even for them there is some uncertainty with the Government shutdown in the US delaying many expected data points.
US inflation data is expected on Friday and should show that inflation has accelerated slightly as the effects of tariffs begin to show through.
These CPI numbers will be quite important because they come just before the US Federal Reserve meets to consider interest rate adjustments on October 28 and 29.
Locally there are a host of shareholder meetings and quite a few production updates from many mining companies which could move individual share prices quite dramatically.
There are lots of third quarter earnings out in the US as well and investors will be looking to see if there are enough profit upgrades coming through to justify the market’s quite lofty valuations.
Adding to the uncertainty there are a host of other variables including talks around the Ukraine war, the ongoing trade stoush between China and the US and Russia’s continuing drone incursions into NATO airspace.