ASX drops 1.6% as miners & tech sink: Aus shares down 0.7% over the week

The Australian sharemarket snapped its five-day winning streak after spending all of Friday’s session in a sea of red, following Wall St’s weak lead after US Fed Chair Jerome Powell indicated potential rate increases. The materials sector led today’s heavy fall as it sunk more than 3 per cent, followed by technology and energy, while health care was the only sector to close higher. 

OZ Minerals (ASX:OZL) rocked the materials sector after reporting on its March quarter, along with Mineral Resources (ASX:MIN).

OZ Minerals (ASX:OZL) said its full-year production and costs guidance remains on track despite Covid-19 and weather interruptions. The company’s C1 cash costs were higher than the prior quarter with Covid-19 restrictions and wet weather leading to lower gold and copper production. Meanwhile, OZ Minerals reported a cash position of $210 million after reinvesting $176 million in growth projects. Shares closed 6.5 per cent lower at $24.52.

Mineral Resources (ASX:MIN) said it remains on track to meet FY22 guidance after reporting on its March quarter, which saw a 16 cent increase in production volumes. Its iron ore shipments rose 22 per cent from the prior year period, driven by growth at the Utah Point Hub, while it remained lower when compared to the prior quarter. The company said its iron ore business is on track to meet guidance for export shipments, along with its Mt Marion lithium project. Shares closed 2.1 per cent lower at $60.78.

Heavyweight miners tumbled today, led by BHP (ASX:BHP), which closed closed 4.4 per cent lower at $48.49. The stock fell 6.8 per cent in the past five days. Its quarterly update yesterday noted a weak performance in copper and thermal coal divisions that detracted from the broadly in-line performing, iron ore business. Rio Tinto (ASX:RIO) closed 2.4 per cent lower at $113.60 following its update on Wednesday which posted a “challenging quarter”, while Fortescue Metals (ASX:FMG) also closed 1.2 per cent lower at $21.22.

Gold miners were heavy, led by Northern Star (ASX:NST), which tumbled 4.4 per cent to $10.73, followed by Evolution Mining (ASX:EVN), which closed 3.9 per cent lower at $4.17.

Megaport (ASX:MP1) weighed on the tech space, down 9.7 per cent to $9.04 as the worst performer, while Afterpay owner Block (ASX:SQ2) fell 6.4 per cent to $146.13 after Wall Street’s Block fell 6.9 per cent overnight.

Energy stocks sent shares lower, with Woodside Petroleum (ASX:WPL) down 2.7 per cent to $32.07, Santos (ASX:STO) down 2.6 per cent to $8.15 and Beach Energy (ASX:BPT) down 2.4 per cent to $1.66.

Major banks plummeted after Commonwealth (ASX:CBA) lost the most points, down 2.8 per cent to $105.37, followed by Macquarie (ASX:MQG), which closed 1.6 per cent lower at $207.60. National Australia Bank (ASX:NAB) dropped 1.4 per cent to $33.14, Westpac (ASX:WBC) fell 1.2 per cent to $24.21 and ANZ Banking (ASX:ANZ) shed the least, down 0.8 per cent to $27.78.

At the closing bell, the S&P/ASX 200 was 1.6 per cent or 119.5 points lower at 7473.3. Over the week, it closed 0.7 per cent or 50 points lower.

Local economic news

The S&P global purchasing manager’s indexes for April were released with the following figures:

Flash Australia PMI composite output index rose from 55.1 in March to 56.2 in April. This marked a third consecutive month of expansion for Australia’s private sector and at the fastest rate in two months. Private sector output expanded at a faster pace in April with service sector business activity driving the improvement. This came as new orders for Australian goods and services grew at the fastest rate since May 2021.

Flash Australia services PMI activity index rose to 56.6 in April from 55.6 in March, marking a third consecutive month in which Australian services output expanded. Improvements in Covid-19 conditions underpinned the growth of demand for Australian services, thus leading to the uptick in business activity in April.

Flash Australia manufacturing PMI improved from a final reading of 57.7 in March to 57.9 in April. This marked the twenty-third successive month in which conditions in the manufacturing sector strengthened, with the latest improvement the most marked in five months. Manufacturing production expansion accelerated in April amid faster new orders growth. This was underpinned by better local and overseas demand with new export orders seeing growth for the first time in four months.

What else was on watch today?

There were several broker calls that were all downgrades. Starting with Morningstar with five broker downgrades, Challenger (ASX:CGF) cut to hold from buy, with shares down 4.4 per cent to $7.17, Growthpoint (ASX:GOZ) cut to sell from hold, with shares down 1.1 per cent to $4.43, Steadfast Group (ASX:SDF) cut to hold from buy, with shares up 0.8 per cent to $5.04, Worley (ASX:WOR) cut to sell from hold, with shares down 0.5 per cent to $14.35 and Newcrest Mining (ASX:NCM) cut to hold from buy, with shares down 1.8 per cent to $28.29.

Goldman Sachs cut Bega Cheese’s (ASX:BGA) rating to sell from neutral, with shares down 0.4 per cent to $5.13, while Jefferies also downgraded Brambles (ASX:BXB) to underperform from hold, with shares down 0.7 per cent to $10.74.

Credit Suisse also cut Endeavour Group (ASX:EDV) to underperform from neutral, with shares up 1.7 per cent to $7.74, and Canaccord cut Megaport (ASX:MP1) to hold with a price target of $11, with shares down 10.2 per cent to $8.99.

Meanwhile, Abu Dhabi Investment Authority is among investors in a consortium led by KKR seeking to buy Ramsay Health Care (ASX:RHC) for $20.1 billion, according to Bloomberg. The stock was up 30 per cent in 5 days, and closed 1.2 per cent higher at $83.97.

Alliance Aviation (ASX:AQZ) executed a $21 million facility agreement with the Northern Australian Infrastructure Facility. The 15-year deal provides Alliance with the final piece of funding required to complete the aircraft maintenance facility in Rockhampton. Construction has commenced, while it expects practical completion to finish by November this year. Shares closed 1.2 per cent lower at $4.00.

Telix Pharmaceuticals (ASX:TLX) reported on its March quarter, with focus placed on its prostate cancer product. The company held cash reserves of $154.7 million, compared to $22 million the prior quarter thanks to a $175 million placement earlier this year to fund projects. Shares closed 3 per cent lower at $4.46.

Chemicals business DGL (ASX:DGL) has acquired the manufacturer Total Coolant for $2.47m. DGL said Total Coolant’s diversified customer base and geographical footprint further enhance the capabilities of DGL’s chemical manufacturing division, aligned with DGL’s cross-sell strategy. Shares closed 0.2 per cent lower at $4.10.

That’s a wrap for the week, the ASX will reopen next Tuesday after Anzac Day.

Futures

The Dow Jones futures are pointing to a fall of 72 points.
The S&P 500 futures are pointing to a fall of 9 points.
The Nasdaq futures are pointing to a fall of 19 points.
The SPI futures are pointing to a fall of 114 points when the market next opens.

Best and worst performers

The best-performing sector was Health Care, up 0.5 per cent. The worst-performing sector was Materials, down 3.3 per cent.

The best-performing stock in the S&P/ASX 200 was Endeavour (ASX:EDV), closing 1.7 per cent higher at $7.74. It was followed by shares in Ramsay Health Care (ASX:RHC) and CSL (ASX:CSL).

The worst-performing stock in the S&P/ASX 200 was Megaport (ASX:MP1), closing 9.7 per cent lower at $9.04. It was followed by shares in Paladin Energy (ASX:PDN) and PointsBet Holdings (ASX:PBH).

Asian markets

Japan’s Nikkei has lost 1.6 per cent.
Hong Kong’s Hang Seng has lost 0.1 per cent.
China’s Shanghai Composite has gained 0.6 per cent.

Wall Street

Over the last four trading days, the Dow Jones gained almost 1 per cent, the S&P 500 gained 0.02 per cent and the Nasdaq lost 1.3 per cent.

Commodities and the dollar

Gold is trading at US$1954.15 an ounce.
Iron ore is 0.4 per cent lower at US$150.05 a ton.
Iron ore futures are pointing to a fall of 1.9 per cent.
Light crude is trading $1.35 lower at US$102.44 a barrel.
One Australian dollar is buying 73.39 US cents.