The ASX has slipped, despite a strong rally for tech stocks and the removal of a negative outlook on Australia’s sovereign credit rating, with falls for the major banks having led the decline.
Key points:
- The S&P 500 rose 0.9 per cent on Friday, while the Nasdaq was up 1.5 per cent
- The ASX closed lower on losses for the financial sector
- The Australian dollar remained steady despite the removal of a negative outlook on Australia’s credit rating
Ratings agency S&P had a negative outlook on the Australian government’s AAA credit rating, meaning there was a risk of a downgrade in the near-term, but has removed it, citing Australia’s strong economic recovery from COVID.
“The government’s swift and decisive fiscal and health response to contain the pandemic and limit long-term economic scarring has seen the economy recover quicker and stronger than we previously expected,” the ratings agency noted.
“Australia has a strong track record of managing major economic shocks, moderating our concern over its high level of external and household debt.”
The announcement did not boost the local currency, which was flat today at 77.43 US cents.
It also failed to boost the banking sector, even though the sovereign rating action also resulted in Australia’s big four banks and Macquarie had their current ratings reaffirmed as stable as a result of the implicit guarantee they will be backed by the federal government if they are at risk of collapse.
The financial sector fell 1.1 per cent, and was the main reason the major indices closed in the red.
ASX falls as AUSTRAC investigates casinos, NAB
The ASX 200 ended down 0.2 per cent to 7,282 points, retreating from modest gains posted earlier in the session.
Some of the biggest losers were companies under scrutiny from anti-money laundering agency AUSTRAC.
SkyCity Entertainment closed down 6.5 per cent, while National Australia Bank was down 3.2 per cent, Star Entertainment down 2 per cent and Crown Resorts off 1.5 per cent.
All four businesses this morning revealed that they had been referred to AUSTRAC’s enforcement unit for potential breaches of anti-money laundering laws.
The falls extended to other stocks in the gaming sector, including Aristocrat (-1pc) and Tabcorp (-1.2pc), as well as the banking sector, with ANZ (-1.3pc), Commonwealth Bank (-0.6pc) and Westpac (-0.9pc) dragging.
It was a better session for the major miners, but the sector gave up stronger early gains to finish fairly flat, with BHP up 0.2 per cent, Rio Tinto up 0.6 per cent, but Fortescue giving up early gains to close 1.4 per cent lower.
Tech stocks were also following a strong lead from the US Nasdaq index, with Nuix (+6.2pc), Appen (+6.1pc), EML Payments (+4.2pc) and WiseTech Global (+3.1pc) all sharply higher.
Shares in software firm Altium surged 39 per cent, to $37.83, after it rejected a buyout offer from American company Autodesk.
Altium’s board said Autodesk’s proposal of $38.50 per share significantly undervalued the company’s prospects.
Tax deal being scrutinised
Investors are still evaluating a weekend corporate tax deal struck by G7 nations, to pursue higher global taxation on multinational businesses.
The landmark deal could raise hundreds of billions more in tax revenue from global companies, including tech giants Google, Apple and Amazon.
Global stocks closed near all-time highs on Friday, as oil and gold prices rose.
Stocks on Wall Street made gains, with the S&P 500 closing up by 0.9 per cent, while the Nasdaq rose 1.5 per cent.
Shares in cinema chain AMC, one of the “meme stocks” caught up in the frenzy around Gamestop earlier this year, finished a volatile week more than 80 per cent higher, despite falling during Friday’s session.
US jobs ‘not too strong, but strong enough’
One factor that helped lift markets on Friday was a softer-than-expected US jobs report.
The crucial non-farm payrolls data for May showed 559,000 jobs created in the month, below forecasts of 650,00 jobs.
That eased concerns that a strong US recovery could prompt the Federal Reserve to shut off the stimulus taps sooner.
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It’s still a strong number. The way I see it is it’s lacking a certain wow factor that the market was expecting, and that can help keep rates a bit lower here,” TD Securities interest rates strategist Gennadiy Goldberg told Reuters.
NAB strategist Rodrigo Catril agreed the data was not too strong so as to concern markets but “strong enough to suggest the US labour market remains on a strong recovery path”.
The country’s unemployment rate fell to 5.8 per cent, while average hourly earnings rose, as employers had to pay more to attract staff.
“The thinking here is that the current labour supply shortage is largely driven by factors that are likely to fade over the coming months,” Mr Catril said.
ABC/Reuters