Rates talk, iron ore drops lead ASX lower: Wednesday 26 May

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Steven Deare
(Australian Associated Press)

 

Talk of rate rises from New Zealand’s central bank and falling iron ore prices have prompted investors to send Australia’s share market lower.

The Reserve Bank of New Zealand on Wednesday kept rates on hold but flagged it expects cash rates to rise from mid-next year.

The forecast comes amid talk of inflation as economies rapidly recover from the coronavirus pandemic.

Investors tipped Australia’s central bank to adopt a similar tone on rate rises and bought the Aussie dollar in addition to the New Zealand one.

The Aussie dollar climbed to the higher ranges of 77 US cents.

Burman Invest chief investment officer Julia Lee said the New Zealand decision seemed to strengthen the Aussie dollar but weaken the share market.

“For equity markets, rising interest rates are a cost,” she said.

Shares were higher before the rates commentary from across the Tasman but closed lower.

The benchmark S&P/ASX200 index closed down by 22.7 points, or 0.32 per cent, to 7092.5.

The All Ordinaries closed lower by 17.5 points, or 0.24 per cent, to 7331.6.

Meanwhile iron ore prices fell during Aussie trade and contributed to materials shares falling.

The shares were the worst performer and closed lower by 1.15 per cent.

Miners BHP, Fortescue and Rio Tinto all lost more than two per cent.

Information technology shares were the top performer and gained 1.11 per cent.

Cargo software vendor WiseTech Global climbed 3.06 per cent to $27.94.

The moderate moves on the ASX indices come after US stocks closed slightly lower.

Federal Reserve officials continued to downplay rising price pressures.

Fed vice chair Richard Clarida said the central bank can take steps to cool a jump in inflation, if it occurs, without derailing the economic rebound.

On the ASX, Commonwealth Bank shares traded for $100 for the first time since the bank joined the market in 1991.

They rose as high as $100.30 as investors tip banks to benefit from Australia’s economic recovery.

Shares closed lower by 0.05 per cent to $99.58.

Financial shares were better by 0.02 per cent.

Travel shares slipped after Melbourne’s coronavirus outbreak increased to 15 infections.

Acting Victorian Premier James Merlino said he could not rule out tougher restrictions.

Corporate Travel Management had one of the biggest losses for getaway providers and slumped 1.55 per cent to $20.36.

Flight Centre dropped 1.33 per cent to $14.89. Qantas lost 0.85 per cent to $4.67.

Testing and inspection provider ALS surged by 12.84 per cent to $12.30 after hiking its final dividend and posting stable full-year earnings.

ALS second-half sales improved in its key markets of life sciences, commodities and industrials as the coronavirus threat eased.

Shareholders will receive a final dividend of 14.6 cents per share (70 per cent franked). This is better than the previous final payout of 6.1 cents per share.

Underlying net profit after tax for the 12 months to March 31 dropped 1.5 per cent.

Fletcher Building said it would begin an on-market share buyback of up to $NZ300 million.

The building products and distribution provider also narrowed its full-year earnings forecast to the upper part of its previously issued range.

The forecast is $NZ650 million to $NZ665 million.

Shares were up 3.87 per cent to $6.97.

The Australian dollar was buying 77.74 US cents at 1723 AEST, higher from 77.68 US cents at Tuesday’s close.

 

ON THE ASX

  • The benchmark S&P/ASX200 index closed down by 22.7 points, or 0.32 per cent, to 7092.5.
  • The All Ordinaries closed lower by 17.5 points, or 0.24 per cent, to 7331.6.
  • At 1723 AEST, the SPI200 futures index was down four points, or 0.06 per cent, to 7086.

 

CURRENCY SNAPSHOT

One Australian dollar buys:

  • 77.74 US cents, from 77.71 cents on Tuesday
  • 84.64 Japanese yen, from 84.41 yen
  • 63.53 Euro cents, from 63.40 cents
  • 55.00 British pence, from 54.73 pence
  • 106.43 NZ cents, from 107.46 cents.
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