The Australian sharemarket went backwards after Wall Street tumbled on the back of new inflation figures, but iron ore stocks rose as the price of the steelmaking commodity surged.
The benchmark S&P/ASX200 index closed 0.98 per cent lower at 7217.3 while the All Ordinaries Index fell 1.05 per cent to 7515.8.
CommSec analyst Steven Daghlian said it followed a three-day winning streak, with the local bourse hitting a three-week high on Thursday.
US markets were hit hard by the news inflation jumped 7.5 per cent in the year to January – a fresh 40-year high – which was a bit higher than expected, Mr Daghlian said.
“What this essentially has done is raised questions over what the Federal Reserve might do in coming months. There is an expectation, in the market at least, that we could see a rate hike in March,” he said.
“Now the question is how big that rate hike could be.”
Reserve Bank of Australia governor Philip Lowe told a parliamentary hearing that moving interest rates too early could put jobs at risk.
He highlighted the differences between Australia and the US, with headline inflation here only 3.5 per cent.
OMG chief executive Ivan Tchourilov said February’s rosy start — with the ASX gaining 310 points up until Thursday night’s close — came crashing down at the end of the week.
The only sector in the green was materials.
Rio Tinto lifted 2.86 per cent to $122.36, BHP gained 1.2 per cent to $48.86, Fortescue added 2.47 per cent to $22.83 and Mount Gibson Iron leapt 10.3 per cent to 53.5 cents.
“What’s helpful there is the iron ore price, which rose by about 5 per cent in the past 24 hours,” Mr Daghlian said.
The tech sector followed US counterparts firmly lower.
“Every time we get stronger inflation figures, markets start to think about what this could mean for higher interest rates, the bond market tends to react and pushes bond yields higher,” Mr Daghlian said.
“Generally speaking, higher bond yields can be a negative for the valuations of some of these tech stocks.”
Buy-now-pay-later provider Zip slumped 7.17 per cent to $2.85 and Afterpay acquirer Block sank 6.68 per cent to $147.45.
Insurance Australia Group, which is behind NRMA, gained 4.18 per cent to $4.74 after returning to profitability in the first half and declaring a dividend of 6 cents per share, down from 7 cents for the previous corresponding period.
“It also upgraded its guidance for the year,” Mr Daghlian noted.
The insurer raised premiums while motor vehicle claims fell.
“During the pandemic, people have been spending longer at home off the roads and that has meant fewer car accidents,” Mr Daghlian said.
“What hurt the company was all the bad weather we’ve had, so hail storms, flooding, earthquakes.
“This has meant it has had to spend about $300m more than anticipated on claims.”
Retailer Baby Bunting declined 2.95 per cent to $5.27 despite a positive half-year report.
“It did achieve record sales, it grew profits by 12 per cent and it raised its dividend by about 14 per cent over the past six months,” Mr Daghlian said.
“What has helped for the company is it has sold more online, it was lucky enough to keep all of its stores open during the pandemic and it was also quite well stocked.”
The Australian Competition and Consumer Commission gave clearance to Wesfarmers’ acquisition of Priceline owner Australian Pharmaceutical Industries, which is expected to be complete by the end of March.
Shares in the Bunnings owner dipped 1.1 per cent to $52.80 while API firmed 0.33 per cent to $1.52.
Commercial real estate group Unibail-Rodamco-Westfield jumped 6.46 per cent to $5.60 after selling a 45 per cent stake in a shopping centre in Greater Paris and creating axjmtzyw joint venture with Societe Generale Assurances and BNP Paribas.
AGL Energy shed 5.92 per cent to $6.84 after posting disappointing half-year results and being criticised by Energy Minister Angus Taylor for bringing forward the closure of two coal-fired power stations on Thursday.
Mr Taylor said it would “leave a considerable gap of close to 5000 MW of reliable generation in the National Electricity Market”.
ANZ put on 0.4 per cent to $27.82, Commonwealth Bank gave up 2.2 per cent to $98.55, National Australia Bank added 0.57 per cent to $29.84 and Westpac improved 0.7 per cent to $22.78.
In other economic news, Australian Securities and Investments Commission chair Joseph Longo told a parliamentary committee hearing on oversight of the corporate watchdog that it could not “meet all expectations”.
Asked if ASIC was being funded well enough, he hinted perhaps not, saying its digital transformation program alone was a big task.
A committee member also said it was “nonsense” ASIC was not subject to Compensation for Detriment Caused by Defective Administration claims but that issue was taken on notice to discuss at another time.
The Aussie dollar was fetching 71.21 US cents, 52.55 British pence and 62.51 Euro cents in afternoon trade.
