US rate expectations snap market’s run

Trevor Chappell
(Australian Associated Press)

The Australian share market’s five day winning streak has come to end as the possibility of accelerated interest rate hikes in the US again spooked investors, and market heavyweight Telstra traded ex-dividend.

The benchmark S&P/ASX200 index was down 0.7 per cent at 6,016 points, pulled back by the resources sector and Telstra.

Global markets retreated after US Federal Reserve chair Jerome Powell’s comments to the US Congress about a strengthening US economy and growing demand heightened speculation that the US Federal Reserve may accelerate interest rate hikes this year.

Phillip Capital senior client adviser Michael Heffernan said that gave the local market a soft lead, along with generally weaker commodity prices.

“Powell’s comments clearly had a detrimental effect on the market short term,” Mr Heffernan said.

“But he made comments about how strong the American economy was and was becoming, and how the tax cuts were going to be beneficial – all that stuff is very positive.

“And when that sinks in, I think we will see another leg up.”

BHP Billiton dropped two per cent, Rio Tinto fell 0.6 per cent and Fortescue Metals sagged 3.1 per cent.

The major banks also fell, with Westpac the worst performer, descending 1.2 per cent.

Telstra dropped 14 cents, or four per cent, to $3.35 as it traded without its 11 cents-per-share interim dividend.

Harvey Norman was the worst performer in the ASX 200, plunging 12.4 per cent to $4.01, after its half-year net profit slumped due to weaker property value growth and an impairment in its dairy investments.

Mr Heffernan said other companies to deliver results, such as Ramsay Health Care, Adelaide Brighton and Bega Cheese, produced satisfactory results but were belted by investors for not surpassing expectations.

Ramsay Health Care dropped 5.7 per cent after the private hospital operator’s half-year profit dropped four per cent due to provisions for a centralisation program being implemented at its French operations.

Bega Cheese shed 6.4 per cent despite its first-half net profit rising 31 per cent.

Cement and masonry supplier Adelaide Brighton dropped 5.9 per cent after its full-year profit slipped two per cent.

The Australian dollar is back below 78 US cents as the US dollar was strengthened by the Federal Reserve chairman’s hawkish economic stance.


* The benchmark S&P/ASX200 index was down 40.9 points, or 0.68 per cent, at 6,016 points.

* The broader All Ordinaries index was down 42 points, or 0.68 per cent, at 6,117.3 points

* The SPI200 futures contract was down 35 points, or 0.58 per cent, at 6,001 points.

* National turnover was 3.4 billion securities traded worth $8.1 billion.


One Australian dollar buys:

* 77.97 US cents, from 78.48 US cents on Tuesday

* 83.48 Japanese yen, from 83.87 yen

* 63.76 euro cents, from 63.67 euro cents

* 56.08 British pence, from 56.20 pence

* 107.74 NZ cents, from 107.71 NZ cents


The spot price of gold in Sydney at 1700 AEDT was $US1,317.80 per fine ounce, from $US1,333.07 per fine ounce on Tuesday.


* CGS 4.50 per cent April 2020, 1.9978pct, from 1.9517pct on Tuesday

* CGS 4.75pct April 2027, 2.7492pct, from 2.6983pct

Sydney Futures Exchange prices:

* March 2018 10-year bond futures contract at 97.205 (implying a yield of 2.795pct), from 97.255 (2.745pct) on Tuesday

* March 2018 3-year bond futures contract at 97.89 (2.11pct), from 97.935 (2.065pct).

(*Bond market closes taken at 1630 AEDT previous local session; currency closes taken from 1700 AEDT previous local session)


Like This