In third day of losses, ASX 200 closes 1% lower

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Highlights

  • ASX 200 trimmed some of its early losses but still finished the day down 1% to 7.051.2.
  • Australian retail sales rose an inflation-adjusted 1.2% from the previous quarter, as per Australian Bureau of Statistics (ABS).
  • Investor concerns have intensified about the damage incurred by China’s lockdowns and coordinated central bank tightening on the pace of global growth.

Currently, significant gravitational forces are roiling global financial markets and threatening a global economic slump. For instance- China’s lockdowns and weakest trade performance since the initial impacts of the pandemic, rising interest rates and geopolitical turmoil in some parts of the world. Central banks’ shift from easy monetary policy to tightening to cool the hottest inflation in decades also has kept investors edgy.

Some events that majorly impacted markets today-

  • Oil crumpled under the weight of a broader market selloff as the EU softened its proposed sanctions on Russian crude to appease probable holdouts.
  • The world’s second-largest economy, China, extended lockdowns to curb the spread of Covid-19 and fears rose about slowing demand from this top importer.
  • In the first quarter, Australian retail sales rose an inflation-adjusted 1.2% from the previous quarter, beating analysts’ forecasts of a 1% gain, as per the Australian Bureau of Statistics (ABS).
  • The Australian dollar fell to US69.45¢, its lowest since mid-2020.
  • In the US and elsewhere, investors are cautious ahead of tomorrow’s crucial US consumer price index release for April.

How did ASX 200 perform?

The Australian share market was set for heavy losses today. In early trade, Australian shares dropped to their lowest in three months, reacting to worries about global growth as China intensified its zero-Covid policy and aggressive central bank tightening.

The ASX 200 plunged as much as 2.5% in the morning before stemming the losses to be down 1.7% at 6997 by noon. All sectors remained lower at noon, but iron ore and gold miners were hit hard. Iron ore futures plunged 7% on China concerns and a rising dollar.

Eventually, the index closed 1% lower, marking the third consecutive day of losses. It dropped 86.80 points or 1.22% to 7,033.90 and set a new 50-day low. Over the last five days, the index has lost 3.86% and sits 4.08% above its 52-week low.

On the sectoral front, ten of 11 sectors were lower. Telecommunications Services was the best performing sector, gaining +0.35% and rebounding from its recent decline. This sector is off -3.07% for the past five days.

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Who gained? Who lost?

The top performer today continued to be Polynovo Limited (ASX:PNV), up 15%. It was followed by Pendal Group (ASX:PDL), after it posted a higher profit and dividend. For 1H22, underlying EPS was up 34% vs prior corresponding period, while underlying profit after tax (UPAT) was up 59%. The interim dividend of 21 cps was up 24%.

Next up was Life360 (ASX:360), up over 5%. Other gainers of the day were Iress Limited (ASX:IRE) and Rea Group (ASX:REA).

On the other side, in the red zone of the ASX 200, AUB Group (ASX:AUB) was the biggest laggard, its stock down over 12%. It has successfully completed the institutional component of its AU$350 million capital raising. Other stocks in this zone were Chalice Mining (ASX:CHN), Paladin Energy (ASX:PDN), Alumina Resources (ASX:AWC) and Beach Energy (ASX:BPT).

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Asian and global market

China’s woes, a global wave of monetary tightening and the war in Ukraine are clouding today’s world economy.

Today, an Asia-Pacific equity gauge fell to the lowest since July 2020 amid drops in Japan, China and Hong Kong. Japan’s Topix index shed 1.8%, South Korea’s Kospi index declined 1.8%, China’s Shanghai Composite index fell 1.2%, and Hong Kong’s Hang Seng index was 2.9% lower. 

Overnight on Wall Street, Dow Jones Industrial Average fell 1.99%, S&P 500 lost 3.20% and Nasdaq Composite dropped or 4.29%.

Wall Street remains fixated on the Federal Reserve’s challenge of taming inflation without tipping the world’s biggest economy into recession, ahead of tomorrow’s crucial US consumer price index release for April.


 


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