Late selloff hit stocks on renewed recession fears, hawkish Fed, Russian oil ban: ASX closes off 1%

The Australian sharemarket closed at session lows, snapping its two-day winning streak as concerns mounted on hawkish comments from the Fed and whether the central bank can effectively raise rates while avoiding a recession. The news on the partial ban of Russian crude from the European Union as inflation sits at multi-year highs also added to the nervousness, offsetting the optimism from China’s easing of Covid-19 lockdowns that helped commodities prices rally.

At the closing bell, the S&P/ASX200 closed 1 per cent or 75 points lower at 7,211.

Investors learned that Federal Reserve governor Christopher Waller said he wants to keep hiking interest rates in increments of 50 basis points until inflation hits the central bank’s target. This saw investors sell out of equities and treasuries, while the greenback firmed.

In a broad sell-off led by banks and information tech, Commonwealth Bank of Australia (ASX:CBA) fell 2.1 per cent to $104.36 and Block (ASX:SQ2) tumbled 3 per cent to $126.

Late selling saw BHP Group (ASX:BHP) give back its earlier gains to close 0.7 per cent lower at $44.61, while Fortescue Metals Group (ASX:FMG) and Rio Tinto (ASX:RIO) managed to hang onto narrow gains, adding 1.3 and 0.6 per cent respectively.

On the back of oil prices rising to three-month highs, Beach Energy (ASX:BPT) jumped 5.2 per cent to $1.73, making it the best-performing stock in the ASX 200, followed by De Grey Mining (ASX:DEG), and Whitehaven Coal (ASX:WHC). Laggards included Tyro Payments (ASX:TYR), which fell 6.6 per cent to $1.06, along with Suncorp Group (ASX:SUN), and Zip Co (ASX:ZIP).

ResApp Health (ASX:RAP) has requested to be put into a trading halt until June 2, pending an update to the market regarding its proposed acquisition by Pfizer Australia. The pharmaceutical giant has expressed interest in taking 100 per cent of shares in RAP, which develops smartphone applications for the diagnosis and management of respiratory disease.

Centuria Capital Group (ASX:CNI) has secured $223 million worth of healthcare and daily needs retail assets on behalf of existing institutional partnerships. The $1.8 billion specialist investment manager continues to unveil real estate deals under its institutional vehicle. Shares closed 0.9 per cent lower to $2.22.

Crown Resorts (ASX:CWN) has been hit with a $80 million fine from the Victorian Gambling and Casino Control Commission in relation to the China UnionPay process. The gaming watchdog has also indicated it continues to consider “further disciplinary proceedings against Crown related to the other findings of the Royal Commission, which may each attract a fine of up to $100 million.” Crown shares closed 0.5 per cent lower to $12.84.

Kalium Lakes (ASX:KLL) soared 13.7 per cent to 10 cents after the company provided an update to its operational status at its Beyondie sulphate of potash project.

Mighty Kingdom (ASX:MKL) has come out of a trading halt and clarified its announcement around its partnership with Google. Shares tumbled 12.3 per cent to 6.4 cents.

Local economic news

Australia’s current account surplus fell $5.7 billion to $7.5 billion (seasonally adjusted) in the March quarter, while the total number of dwellings approved were an adjusted 2.4 per cent lower in April, following on from their 19.2 per cent fall in March.

China’s monthly purchasing managers index (PMI) came in at 49.6 for May, ahead of consensus 49.0 and rebounding sharply from April’s post-pandemic low of 47.4 in the previous month. The recovery was driven by production, new orders, supplier delivery times and, to a lesser extent, exports. Nevertheless, the sub-50 reading is still considered to be in “contraction” territory. Non-manufacturing PMI was 47.8 vs consensus 45.0 and prior 41.9, while the composite PMI recovered to 48.4 from 42.7, but remains slightly below the March level of 48.8.

Futures

The Dow Jones futures are pointing to a rise of 6 points.
The S&P 500 futures are pointing to a rise of 3 points.
The Nasdaq futures are pointing to a rise of 41 points.
The SPI futures are pointing to a fall of 15 points when the market next opens.

Asian markets

Hong Kong’s Hang Seng has gained almost 1 per cent.
Japan’s Nikkei has lost 0.3 per cent.
China’s Shanghai Composite has gained 0.8 per cent.

Commodities and the dollar

Gold is trading at US$1854.17 an ounce.
Iron ore is 1.6 per cent higher at US$136.60 a ton.
Iron ore futures are pointing to a rise of 3.1 per cent.
Light crude is trading $2.17 higher at US$119.34 a barrel.
One Australian dollar is buying 71.90 US cents.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics