A disappointing ANZ earnings result was enough to trigger a sell-off in the big banks on Tuesday, but gains elsewhere on the ASX helped limit the losses.
The benchmark S&P/ASX 200 index fell 6 points to 5950.4, while the broader All Ordinaries index fell 5 points to 5971.4. The decision by the Reserve Bank of Australia to keep rates at a record low of 1.5 per cent was widely expected and received little reaction from the market.
ASX winners and losers – a snapshot
The stand out listings traded on the Australian Stock Exchange captured at key moments through the day, as indicated by the time stamp in the video.
On the ASX, an afternoon rally helped erase most of the day’s losses, as bargain-hunting investors moved into the sold-off lenders.
ANZ dragged the index back 7.8 points as it dropped 2.1 per cent.
Balancing the bank drag were strong lifts in a number of large-cap listed property trusts.
Citi banking analyst Craig Williams said the market’s reaction was to be expected “given the extent of the recent share price rally”.
“Whilst ANZ’s restructure remains on track in our view, the ride will be bumpier than many investors expect,” Mr Williams said.
ANZ’s peers, he warned, “face a similar fate”. They were uniformly lower on Tuesday, Westpac shedding 0.9 per cent, the Commonwealth Bank down 0.7 per cent while NAB fell 0.2 per cent.
Also dragging on the index was Macquarie Bank, which reversed some of its strong recent performances to fall 1.5 per cent. Macquarie had been edging towards its highest level since the global financial crisis earlier this week after rising for seven straight sessions.
It wasn’t all bad news, as shares in Woolworths climbed 1.2 per cent after reporting a strong quarterly sales update. Those gains came at the expense of Wesfarmers, which owns the Coles supermarket chain and lost 0.7 per cent.
Also balancing the bank drag were strong lifts in a number of large listed property names. Five of the stocks to provide the index with the most lift were from the sector.
It’s not clear what exactly drove the gains, said CLSA head of Australian real estate equities research Sholto Maconochie. Charter Hall and Dexus did deliver quarterly updates on Tuesday, while at the Macquarie investor conference in Sydney, the heads of several listed real estate groups – such as Dexus, Charter Hall Group and Goodman Group – indicated they were considering locations to house Amazon as the retail giant enters Australia.
Scentre Group added 1.6 per cent, LandLease rose 3.9 per cent, Stockland added 1.6 per cent, Goodman Group added 1.5 per cent while Dexus rose 1.9 per cent. Charter Hall, which already has Amazon as one of its tenants in Sydney, was up 2.4 per cent, one of a the biggest movers that helped the S&P/ASX Small Ordinaries index finish the day up 0.7 per cent.
The biggest gainer of the day was Bellamy’s Australia, which doesn’t appear to have lost any of its recent momentum. The stock added 11.9 per cent on Tuesday, after rising 5.1 per cent on Monday and 15.0 per cent last week.
Stock Watch: MG Unit Trust
Shares in MG Unit Trust – the ASX-listed funding vehicle for Australia’s largest milk producer Murray Goulburn, plunged 14 per cent to 89c after the cooperative said it was suspending its dividend in order to write off almost $150 million in debts owned to it by farmers. MG Unit Trust was floated in 2015 to allow non-farmers to invest in Murray Goulburn, which is owned by the diary farmers who sell to it. As well as forgiving debts, the co-op is closing three processing plants and forecast a cut in the price of milk due to “weaker trading conditions”. Last week, the ACCC launched court action against the co-op and its former chief executive, saying they had misled farmers about likely milk prices.
Chinese manufacturing PMI
China’s factory sector lost momentum in April, with growth slowing to its weakest pace in seven months as domestic and export demand faltered, a private survey showed on Tuesday. The findings echoed those in official manufacturing and service sector data on Sunday, reinforcing views that China’s economic growth remains solid but is starting to moderate after a surprisingly strong start to the year. The Caixin/Markit Manufacturing Purchasing Managers’ index (PMI) fell to 50.3 in April, missing economist forecasts’ of 51.0 and a significant decline from March’s 51.2.
Cryptocurrency Bitcoin soared to an all-time high this week, jumping 5.5 per cent to $US1422.22, before settling at $US1416.68. A pickup in global trading activity, particularly from Japan, prompted the virtual currency to surge. After spiking to new highs in January, the cryptocurrency’s price languished for several weeks in March after the SEC rejected the bitcoin exchange-traded fund proposed by investors Cameron and Tyler Winklevoss. Analysts also pointed to continued investor interest in other cryptocurrencies such as ethereum that are near record highs, driving further demand.
The Reserve Bank of Australia kept interest rates on hold for the eighth straight meeting at its all-time low of 1.5 per cent. That was the result unanimously expected by the market and economists surveyed by Bloomberg, however some analysts point to an improvement in the economy which may point to a future tightening bias. “We detect a more upbeat tone on the economy,” says Aberdeen Asset Management Senior Investment Manager Jasmin Argyrou. “The RBA will be keen to see, given that the low interest rate environment is unsuitable for cities like Sydney, where speculative activity in the housing market has been bubbling along for a while.”
The Australian dollar advanced for the third straight day on Tuesday and was fetching US75.27c in late Tuesday trade. The local currency edged higher after the RBA kept interest rates on hold, before retreating to where it began the session. Chief economist at CommSec Craig James pointed out: “Inflation is still low, economic indicators are more mixed and the higher Australian dollar is acting as a modest cap on economic growth”.