Healthcare companies, wage data lift ASX after Wall Street gain

The laggards

Gold and lithium miners were among the weakest companies on the index as Pilbara Minerals shed 3.4 per cent, Allkem dropped 2.9 per cent, and Evolution (down 3 per cent), Northern Star (down 1.9 per cent) and Newcrest (down 1.5 per cent) all declined following a 0.1 per cent fall in spot gold prices overnight.

REITS (down 0.5 per cent) was the weakest sector on the index as Mirvac lost 1.3 per cent, Vicinity Centres dropped 1.1 per cent and Stockland slipped 1 per cent.

Communication services (down 0.2 per cent) were also weaker following a stronger performance on Monday, with Seek losing 4.3 per cent.

The lowdown

JP Morgan Asset Management global market strategist Kerry Craig said the Australian sharemarket had a mixed day of trading but that wage data and the Reserve Bank’s minutes helped boost the index.

“Wage numbers came out weaker than expected and the RBA’s policy minutes were more dovish than expected, indicating some chance that the RBA may be done with hiking interest rates, which the market took as a positive,” he said.

Craig said strength in the healthcare sector was most likely an “earnings story” as some of the biggest healthcare names reported positive results.

However, news out of China weighed on some sectors including mining, Craig said, as the People’s Bank of China made a surprise decision to cut rates. “A slower China means a weaker outlook for commodity prices,” he said.

Meanwhile, Wall Street drifted higher ahead of a week of reports showing how strong US shoppers remain, amid hopes their spending can keep the economy out of a recession.

The S&P 500 added 0.6 per cent, though slightly more stocks fell than rose within the index. The Dow Jones edged up by 0.1 per cent in a quiet day of trading. The Nasdaq composite gained 1.1 per cent.

US Steel jumped to one of the market’s bigger gains, up 36.8 per cent. It said over the weekend that it rejected a buyout offer from Cleveland-Cliffs and that it has heard multiple offers.

Across the rest of the market, trading was relatively quiet. The S&P 500 has retreated 2.2 per cent in August after soaring 19.5 per cent through the first seven months of the year. Critics have been saying a pullback was due, arguing Wall Street too quickly and forcefully latched onto the belief that inflation would continue to cool and the economy would avoid a recession.

A bulwark keeping the economy afloat has been strong spending by US consumers, which has been propped up by a remarkably resilient job market.

On Tuesday, the US government will give the latest monthly update on sales at retailers across the country. Economists say it’s one of the week’s most important reports, and they expect it to show growth accelerated to 0.4 per cent in July from 0.2 per cent in June.

Inflation has been moderating since hitting a peak a year ago, but it remains high and is denting Americans of all incomes.

Conditions may be getting tougher in upcoming months, as rising interest rates make credit card and other payments more expensive. Student loan payments will also weigh on consumers, and many have been spending down savings they had been built up during the pandemic.

The week’s other big economic highlight will be Wednesday’s release of the minutes from the Federal Reserve’s last meeting. At that meeting, the central bank raised its main interest rate to the highest level in more than two decades. It was the Fed’s 11th increase in 17 months as it tries to fight the worst inflation since the 1980s.

The hope on Wall Street is that will be the final hike of this cycle and the next move for the Fed will be to cut rates. That would provide some relief because high rates work to lower inflation by bluntly slowing the entire economy and hurting prices for stocks and other investments.

Traders broadly expect the Fed to hold rates steady at its next meeting in a little more than a month, according to data from CME Group.

In the bond market, the yield on the 10-year Treasury rose to 4.19 per cent from 4.16 per cent late Friday. It helps set rates for mortgages and other important loans.

The two-year Treasury yield, which moves more on expectations for the Fed, rose to 4.96 per cent from 4.90 per cent.

In stock markets abroad, indexes were mixed in Europe after mostly falling in Asia.

China’s waning economic recovery remains a focus for many investors, and stocks fell 1.6 per cent in Hong Kong and 0.3 per cent in Shanghai.

Tweet of the day

Quote of the day

“We know this environment is challenging for our customers, but pleasingly, most are proving resilient, with only a modest deterioration in asset quality in the third quarter,” said NAB boss Ross McEwan as the company delivered a $1.9 billion profit in its third quarter trading update.

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With AP

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