Recession fears weigh ahead of looming US inflation print: ASX closes 0.1% higher

The rally was short-lived on the Australian sharemarket as investors eyed the start of the local earnings season while business and consumer sentiment results painted a grim picture of the impact of inflation and rising interest rates on the nation.

At the closing bell, the S&P/ASX 200 was 0.1 per cent or 4 points higher at 6,606.

Adding to the nerves of investors were previews of the US consumer price index, which is expected to come in at 8.8 per cent year-over-year. Not helping around the inflation story is the potential for a deteriorating global energy crisis while China’s worsening Covid-19 trajectory and the prospect of downgrades to consensus earnings estimates also weigh.

This cautiousness was reflected by the gains in defensive sectors, with consumer staples and utilities both adding 1.2 per cent each while healthcare rose 1.1 per cent. Financials and energy both posted gains at around 0.7 per cent.

There were a few stock standouts propping the sectors, with CSL (ASX:CSL) adding 1.6 per cent to $292.69, ResMed (ASX:RMD) rising 2.1 per cent to $32.32, and Coles (ASX:COL) and Woolworths (ASX:WOW) adding between 1.8 and 2 per cent.

Zip Co (ASX:ZIP) was the best-performing stock on the ASX 200, jumping 4 per cent to 53 cents after the merger with Sezzle (ASX:SZL), inked in February, was mutually dropped. Shares in Sezzle (ASX:SZL) tanked 39 per cent to 25.5 cents.

Life360 (ASX:360) was the worst-performing stock on the ASX 200, tumbling 12.2 per cent to $3.53 while shares in BrainChip Holdings (ASX:BRN) and Chalice Mining (ASX:CHN) also fell.

Meanwhile, coal miners also stood out after investors mulled on last week figures from the Australian Bureau of Statistics, which showed that coal was a huge contributor to the nation’s trade surplus. New Hope Corporation (ASX:NHC) rose 3.5 per cent to $3.90 and was the second-best performer on the ASX 200, while Whitehaven Coal (ASX:WHC) closed 1.8 per cent higher at $5.16.

National Australia Bank (ASX:NAB) led the major banks higher by 1.2 per cent. However, Macquarie Group (ASX:MQG) bucked the trend, closing 0.1 per cent lower.

Local economic news

Australian business confidence fell from 6 points in May to a below-average level of 1 point in June, reflecting concerns about the impacts of inflation and interest rates on consumption, according to the National Australia Bank.

Conditions eased 2 points to 13 points, but remained above average, underpinned by elevated trading, profitability, employment, and forward orders. However, supply pressures were evident, with input and labour cost growth reaching record highs.

Separately, the Australian Westpac-Melbourne Institute consumer sentiment index fell to 83.8 in July from 86.4 in June, continuing a pullback on par with past periods of major economic disruptions. The Reserve Bank of Australia’s (RBA) 50 basis point rate hike had only a mild shock effect, seeing that consumers were more sensitive to inflation.

However, concerns also rose around future rate hikes. More respondents from the Westpac Melbourne institute survey were bearish about local property prices and the 12-month economic outlook. Westpac expects another 50 basis point RBA rate hike in August, and then a more cautious approach after, given the deterioration in consumer sentiment.

Company news

Sports betting company Entain Group has awarded RAS Technology Holdings (ASX:RTH) a five year extension on their deal to provide racing content valued at $5 million in Australia. Shares surged 18 per cent to 59 cents.

Centuria Industrial REIT (ASX:CIP) has completed external valuations on 41 investment properties, representing around 63 per cent of its portfolio value as at 30 June 2022. The remaining properties were subject to internal or director’s valuations. Shares closed 0.3 per cent higher at $2.96.

MyDeal.com.au (ASX:MYD) has reported record gross sales of $272.2 million for the 2022 financial year which is up 24.8 per cent above guidance from the same time a year ago. Shares closed 0.5 per cent higher at $1.03.

Viva Energy (ASX:VEA) has reported that total group sales volumes for the half year ending in June this year rose 5.2 per cent from a year earlier, attributed by strong diesel sales which exceeded pre-pandemic levels. Strong global demand for refined products, especially diesel, coupled with tightening supply from refinery closures, reduced exports from China and Russian oil sanctions, continued to drive stronger global refining margins through the second quarter. Shares closed 2.6 per cent higher at $2.81.

Eagers Automotive (ASX:APE) expects a statutory net profit before tax from continuing operations for the six months ended June this year of $246 million, exceeding the profit guidance of $225 million to $240 million that was provided in May. Shares closed 3.3 per cent higher at $10.91.
 
Futures

The Dow Jones futures are pointing to a fall of 183 points.
The S&P 500 futures are pointing to a fall of 26 points.
The Nasdaq futures are pointing to a fall of 93 points.
The SPI futures are pointing to a fall of 3 points when the market next opens.

Asian markets

Japan’s Nikkei has lost 1.8 per cent.
Hong Kong’s Hang Seng has lost 1.3 per cent.
China’s Shanghai Composite has lost 0.8 per cent.

Commodities and the dollar

Gold is trading at US$1,730.04 an ounce.
Iron ore is flat at US$114.05 a ton.
Iron ore futures are pointing to a fall of 4.0 per cent.
Light crude is trading $1.07 lower at US$91.69 a barrel.
One Australian dollar is buying 67.26 US cents.