ASX falls on financial heavyweights as tariff deadline looms
The Australian sharemarket wiped most of its gains from the previous session, steered lower by losses among the big bank stocks.
The S&P/ASX 200 index fell 26.8 points, or 0.4 per cent, to 6183.4, following an overnight slide on Wall Street as trade tensions rise ahead of the US's trade tariff deadline on Friday.
Financial stocks were hit on Wednesday amid investor anxiety about the fallout from growing global trade tensions. NAB was the index's biggest drag, falling 1.3 per cent to $27.38. Westpac closed 0.5 per cent lower at $29.25, Commonwealth Bank fell 0.5 per cent to $73.59 and Macquarie closed at $121.06, down 1.7 per cent.
AMP shares fell 3 per cent to $3.56 following a note from Shaw and Partners, which said the company could face fines from the corporate regulator and would have to fund the settlement of potential lawsuits. The broker said that if the regulator ended grandfathered commissions, AMP's pre-tax profit could be cut by $250 million. It said that the company could also be forced to lower its dividends and gave AMP a $3 price target.
Two broker notes out of Morgan Stanley were responsible for two of the market's biggest losses. Platinum Asset Management shares fell 8.9 per cent to $5.35 after the broker cut its earnings forecasts, while Magellan Financial shares fell 8.8 per cent to $2.40 after the broker said it faces risks of a persistent slowdown in retail flows.
It was a more positive day on the market for resource stocks, with the biggest gains coming courtesy of positive broker notes.
Resolute Mining led the index gains on Wednesday after the gold producer announced in the previous session that it had been able to deliver lower costs and longer mine life at its Syama underground mine. Canaccord Genuity and Macquarie both upgraded their price targets for the miner, sending its shares 4.6 per cent higher to $1.37.
Iluka Resources rose after Citi upgraded the mineral sands producer from neutral to buy, upgrading its price target from $11.40 to $13.70, citing higher production expectations and better pricing as the key catalysts for the upgrade. Iluka's shares rose 4.3 per cent to $11.18.
Shares in cloud-based accounting and administrative software developer Class fell 11.7 per cent $2.20 after the release of a trading update. The update showed that account growth fell for June from the previous quarter despite customer growth rising. Growth for the June quarter was also the lowest for the past five years for the company.
Stock watch
Platinum Asset Management
Morgan Stanley believes that Platinum Asset Management will face several headwinds in the second half of the year, downgrading its price target for the investment management company from $7 to $6. Platinum's share price fell to its lowest intra-day price since August 2017 on Wednesday following the release of a note in which the broker said it expected the company's earnings to fall. It said the company faced higher retail distributions, lower investment performance and lower prospects for performance fees in the latter half of the year. The broker is expecting EBITDA to be weaker in the second half of the year, forecasting that EBITDA for the next two fiscal years to be lower than in 2017. The company is expected to lower its dividend yield for the next two years, as a result, from 6.5 per cent in 2017, to 4.8 per cent in 2019.
What moved the market
Trade balance
An $827 million trade surplus in May came in below consensus forecasts but still represents a positive result according to CBA senior economist Gareth Aird. The market had been forecasting a $1.2 billion surplus however the result was still positive. "It's still a decent result," said Mr Aird. "It's always preferable to see the trade balance improve via a lift in exports rather than a decline in imports. And today's result marked the sixth consecutive surplus in 2018." Fuel, metal ores & minerals, and coal were the main contributors to the lift in exports while consumption goods led the imports. Mr Aird says that barring a shock June result, the current account deficit is set to widen in Q2 2018.
Commodity
Crude oil tumbled in the middle of Tuesday's trading session after reports from Saudi Arabia that the country's cabinet had reiterated the kingdom's willingness to use its spare capacity to deal with future changes to worldwide oil supply. Saudi Arabia and Russia also said that they would make adjustments equivalent to an extra one million barrels per day under the agreement reached last week. Crude oil prices rose through the start of the session, reaching $US78.50 a barrel before tumbling 2.3 per cent to $US76.73. The price was able to recover through the day to end the session higher at $US77.76 a barrel.
Aussie dollar
The Australian dollar advanced against most major currencies overnight, slipping only slightly against the New Zealand dollar. The US dollar weakened overnight despite their being "no fundamental trigger behind the weakness" according to CBA. The Aussie dollar took some guidance from Wednesday's trade balance and retail trade data releases, shooting above US74¢. Consensus forecasts had been expecting retail trade to grow 0.3 per cent from the previous month while the trade balance was expected to improve to a surplus of $1.2 billion. While the trade balance came in below expectations, improving retail trade figure supported the Aussie advance.
EU and China
The latest escalation in the trade war has come from an apparent unlikely willingness for China to form a partnership with the European Union. China is reportedly putting pressure on the European Union to join them in issuing a statement against US President Donald Trump's trade policies when they meet at a summit later this month. Reuters are reporting that the EU is hesitant to make a joint statement however, believing that the US is correctly accusing China of distorted trade practices. The EU remains critical of President Trump's approach, warning the US it would impose countermeasures on any imposed tariffs on Monday.