Australian shares lacked conviction as investors remained cautious ahead of the US inflation data. The index remained in a holding pattern as it jumped above and below the flat line by a fall and gain of 0.2 per cent to extend gains marginally for a second day.
At the closing bell, the S&P/ASX 200 was 0.2 per cent or 15 points higher at 6,622.
Investors are eagerly awaiting the US consumer price index print, which is expected to set a new 40-year high at 8.8 per cent year-over-year. Concerns are mounting that the next inflation print will reinforce the Federal Reserve’s need to unveil a 75 basis point hike after stronger-than-expected jobs figures last week cemented the strength of the economy.
Other than concerns around the tightening of monetary policy, the US dollar hovered near its highest levels since March 2020, presenting headwinds to other currencies. Meanwhile, oil prices stabilised at about US$93 a barrel after tumbling 8 per cent in the prior session.
In terms of the sectors, energy, utilities, materials and consumer staples finished in the red, while information technology led the advance, followed by communication services and consumer discretionary. The other sectors posted marginal gains. A similar trend was reflected in the best and worst-performing stocks on the ASX 200. Tech player Megaport (ASX:MP1) soared 7.3 per cent to $6.60, while Woodside Energy (ASX:WDS) declined 2.9 per cent to $30.10.
Iron ore miners finished mixed, with Fortescue Metals Group (ASX:FMG) adding 0.6 per cent to $16.99 while BHP Group (ASX:BHP) lost 1.4 per cent to $36.92.
Major banks almost all closed higher, with ANZ Banking Group (ASX:ANZ) as the outlier which fell 1.2 per cent to $22.43 after the third largest bank confirmed it has been in talks with Kohlberg Kravis Roberts & Co about a potential acquisition of MYOB. Macquarie Group (ASX:MQG) led the gains, adding 2.2 per cent to $171.40.
Coal prices extended its rally amid worries that the maintenance of the Nord Stream 1 pipeline will lead to a cut of Russian gas. Whitehaven Coal (ASX:WHC), jumped 4.5 per cent to $5.39, Coronado Global Resources (ASX:CRN) rose 4.2 per cent to $1.61, Terracom (ASX:TER) lifted 3 per cent to 68 cents while Stanmore Resources (ASX:SMR) closed 2.8 per cent higher at $2.78.
Elsewhere, the Shanghai Composite rose 0.1 per cent, snapping a three-day fall. Investors bought in on news from the General Administration of Customs that Chinese trade data showed a 13.2 per cent jump in yuan-denominated exports for the first half of this year while imports rose 4.8 per cent.
China’s foreign trade growth accelerated to 14.3 per cent in June, compared with 9.5 per cent in May and 0.1 per cent in April. During those months, trade between China and Russia rose as sanctions from the West against Russia grew in response to President Vladimir Putin’s incursion into Ukraine.
China’s total trade with Russia was worth 519 billion yuan (US$77 billion) in the first half of the year, up 27 per cent from the same period in 2021. Bloomberg reported that, in the first five months of the year, exports to Russia slumped while imports jumped. Most of China’s imports from Russia are oil, gas and coal.
Local economic news
Construction activity in Australia has tumbled for a third straight quarter, according to the Australian Bureau of Statistics. The total number of new dwellings fell 6.5 per cent to 49,017, pulled by the fall in private sector housing, which was down 11.6 per cent to 29,672. The value of total building work completed fell 0.5 per cent to $30.4 billion in the March quarter, in seasonally adjusted terms. Meanwhile, new home starts are down 6.7 per cent from the same period a year ago.
According to the Housing Industry Association, the boom in building activity was linked to the fall in interest rates. Conversely, the current slowdown is linked to interest rate rises. Two years of elevated new home building was unleashed by falling borrowing costs, pandemic-driven demand and house price escalation. However, the cost of new home construction has risen faster than wage growth, and the cost of borrowing has also increased, so affordability constraints have started to weigh.
The rate rise alone will have a negligible impact on the volume of home construction being commenced in Australia, which is at record levels. But subsequent increases in the cash rate will eventually constrain household expenditure and demand for new homes. In previous rate rising cycles, the first increase in the cash rate led to a slowing in new home construction just six months later.
Looking ahead, labour force figures for June will also be released on Thursday by the Bureau, with the unemployment rate expected to fall to 3.8 per cent from 3.9 per cent. If this is unveiled, it would be the lowest jobless rate since 1974 and could strengthen the Reserve Bank of Australia’s case to raise the cash rate next month.
KMD Brands (ASX:KMD) has unveiled a record performance in Kathmandu’s key winter promotional period, strong retail and wholesale sales in Rip Curl and production improvements at Oboz following Covid-19 factory closures. Shares closed flat at $1.00
BNK Banking Corp (ASX:BBC) is set to reward investors with a 34 cents special dividend payout. The distribution is linked to the sale of its Finsure business to MA Financial late last year. BNK is also reporting record volumes in total lending settlements of $120.7 million for June, a 52 per cent jump year-on-year while total deposits grew by 11.5 per cent at $98.8 million. Shares closed 7.9 per cent higher to $1.02.
Paradigm (ASX:PAR) as an NFL Alumni Health member has entered into a research partnership to inform NFL Alumni members about osteoarthritis and potential clinical trial participation. Shares closed flat at $1.05.
Imugene (ASX:IMU), a clinical stage immuno-oncology company, announces new data from non-small cell lung cancer patients in the Phase I IMPRINTER trial has been selected for a poster presentation at the IASLC 2022 World Conference on Lung Cancer taking place in-person and online from 6-9 August 2022 in Vienna, Austria. Shares closed 2.2 per cent higher to 23 cents.
The Dow Jones futures are pointing to a rise of 30 points.
The S&P 500 futures are pointing to a rise of 4 points.
The Nasdaq futures are pointing to a rise of 19 points.
The SPI futures are pointing to a rise of 18 points when the market next opens.
Japan’s Nikkei has gained 0.5 per cent.
Hong Kong’s Hang Seng has gained 0.1 per cent.
China’s Shanghai Composite has gained 0.1 per cent.
Commodities and the dollar
Gold is trading at US$1723.84 an ounce.
Iron ore is 7.2 per cent lower at US$105.80 a ton.
Iron ore futures are pointing to a fall of 1.9 per cent.
Light crude is trading $0.00 higher at US$93.05 a barrel.
One Australian dollar is buying 67.54 US cents.