The Australian markets continued their losing streak in line with global markets after last week’s bigger than expected inflation print in the US and a massive 75 basis point hike from the Fed.
Markets were also spooked by power shortages in Australia and underwhelming employment data.
The ASX200, ASX300, and ASX Ordinaries closed lower by 6.67%, 6.7%, and 6.8%, respectively, in a holiday-curtailed week.
Table of Contents
Last Week In Stocks
ASX Materials Index (ASX: XMJ)
The flagship ASX Materials Index (ASX: XMJ) suffered a brutal week, slumping 7.79% in the aftermath of dimming consumption outlook at major economies in the US and Europe stemming from hardening rates.
Sector majors Rio Tinto (ASX:RIO), Fortescue Metals (ASX:FMG), BHP (ASX:BHP), Mineral Resources (ASX:MIN), and South32 (ASX:S32) closed in the red by 7.83%, 12.53%, 8.29%, 8.75%, and 13.72%, respectively.
Falling iron ore prices are said to be the reason for the fall.
New energy miners IGO Nickel (ASX:IGO), Allkem (ASX:AKE), and Pilbara Minerals (ASX:PLS) fell 7.37%, 9.55%, and 5.88% while Lynas Rare Earths (ASX:LYC) closed up 0.4% after heavy losses last week.
Gold producers Newcrest Mining (ASX:NCM), Northern Star Resources (ASX:NST), and Evolution Mining (ASX:EVN) were shining spots, gaining 5.73%, 3.49%, and 5.98% tracking higher gold prices during the week.
ASX Energy Index (ASX: XEJ)
The ASX Energy Index (ASX: XEJ) broke last week’s winning streak and crashed 8.57% even as energy shortages swept the country.
Sector heavyweights Woodside Energy (ASX:WDS), Santos (ASX:STO), and Beach Energy (ASX:BPT) were down 8.68%, 9.24%, and 10.19%.
Coal producers had a dismal week too – YanCoal (ASX:YAL) and Whitehaven Coal (ASX:WHC) ended down 8.17% and 6.17%; Stanmore Resources (ASX:SMR), New Hope Coal (ASX:NHC), and Coronado Global (ASX:CRN) fell 7.69%, 2.09%, and 0.8% respectively.
ASX Industrials Index (ASX:XNJ)
The ASX Industrials Index (ASX:XNJ) was slammed a substantial 5.9%.
Industrial commodities makers ADBRI (ASX:ABC), Brickworks (ASX:BKW), and Boral (ASX:BLD) ended lower by 11.41%, 5.21%, and 11.8%, respectively amidst slowing construction activity due to falling real estate prices and rising borrowing costs.
Sector majors Amcor CDI (ASX:AMC), Downer EDI (ASX:DOW), Brambles (ASX:BXB), and Reliance Worldwide (ASX:RWC) ended down 8.95%, 10.73%, 3.81%, and 7.09%, respectively, as the risks of a slowdown/recession in the US also clouds their outlook.
Infra players Transurban Group (ASX:TCL) and Qube Holdings (ASX:QUB) closed 4.28% and 5.70% in the red.
Airlines Qantas (ASX:QAN) and Air New Zealand (ASX:AIZ) ended lower by 15.3% and 4.6%, again primarily driven by recessionary fears.
According to ABC, Qantas will scrap its Alice Springs – Perth route from July due to low passenger demand.
ASX Consumer Discretionary Index (ASX:XDJ)
The Consumer Discretionary Index (ASX:XDJ) nosedived 5.97% as hawkish rate hikes threaten to strangle consumer spending.
In major news from the sector, the courts finally approved the acquisition Crown Resorts (ASX:CWN) by Blackstone and will be de-listed soon.
Travel stocks Webjet (ASX:WEB), Flight Center (ASX:FLT), and Corporate Travel Management (ASX:CTD) took a beating, ending lower by 8.38%, 12.48%, and 10.84%.
Retail stocks fell substantially too on apprehensions of shoppers facing a budget crunch- Temple and Webster (ASX:TPW), Kogan (ASX:KGN), Harvey Norman (ASX:HVN), and JB Hi-Fi (ASX:JBH) crumpled 14.67%, 11.29%, 12.99%, and 11.24%, respectively.
Hospitality companies Star Entertainment (ASX:SGR) and SkyCity Entertainment (ASX:SKC) were not spared the bloodbath either, and closed lower by 9.61% and 4.6%, respectively.
ASX Consumer Staples Index (ASX:XSJ)
The Consumer Staples Index (ASX:XSJ) fared relatively better, losing just 3.29% down for the week.
The bigger players Coles (ASX:COL), Wesfarmers (ASX:WES), and Woolworths (ASX:WOW) ended lower by 4.19%, 5.3%, and 3.78%, respectively.
Food producers Bega Cheese (ASX:BGA), GrainCorp (ASX:GNC), and Costa Group (ASX:CGC) ended down 7.08%, 8.86%, and 1.61%; however, Tassal Group (ASX:TGR) ended up 1.13%.
Processed food makers A2M Milk (ASX:A2M) and Dominos Pizza (ASX:DMP) closed 7.52% and 2.12% in the red while Bubs Australia (ASX:BUB) closed up 1.85% on the back of strong baby formula demand.
ASX Financials Index (ASX:XFJ)
The ASX Financials Index (ASX:XFJ) was knocked backed a heavy 6.98%.
The prospect of rising borrowing costs is likely to hit lending businesses such as credit cards, mortgages, and business loans.
Big banks Westpac (ASX:WBC), Australia New Zealand (ASX:ANZ), National Australia Bank (ASX:NAB), and Commonwealth Bank (ASX:CBA) gave up 7.91%, 8.16%, 7.88%, and 6.66%. Insurers IAG (ASX:IAG), QBE Insurance (ASX:QBE), and Suncorp (ASX:SUN) fared much better compared to the banks having gone down just 1.2%, 7.5%, and 2.04%, respectively.
Wealth management companies Platinum Asset Management (ASX:PTM) and AMP Ltd. (ASX:AMP) ended 1.16% down and 7.58% down, respectively while Magellan Financial (ASX:MFG) closed up 1.38%.
ASX Real Estate Index (ASX:XPJ)
The ASX Real Estate Index (ASX:XPJ) tanked 5.82% as investors feared that spiralling debt costs are likley to hurt all segments of the sector including retail, logistics, and office.
The larger players Goodman Group (ASX:GMG), Dexus Group (ASX:DXS), GPT (ASX:GPT), and Scentre Group (ASX:SCG) slumped 8.69%, 5.88%, 6.45%, and 6.62%.
ASX All Technology Index (ASX:XTX)
The ASX All Technology Index (ASX:XTX) was the worst-performing sector of the week, giving up nearly 9%.
SaaS companies Appen (ASX:APX), Nuix (ASX:NXL), and Xero (ASX:XRO) ended lower by 2.59%, 9.58%, and 11.24% while platform companies REA Group (ASX:REA), RedBubble (ASX:RBL) and CarSales.com (ASX:CAR) skid 8.96%, 7.47%, and 1.09%.
Carsales fared better as rising borrowing costs and inflation are making used cars more attractive.
However, BNPL stocks continued their kamikaze dive – Block (ASX:SQ2), Zip Co. (ASX:Z1P), and MoneyMe (ASX:MME) tanked 24.54%, 14.19%, and 16.76% on the back of rising costs and lower discretionary spending.
Semiconductor and data center companies NextDC (ASX:NXT) and Altium (ASX:ALU) also closed lower at 5.92% and 5.28%.
ASX Healthcare Index (ASX:XHJ)
The ASX Healthcare Index (ASX:XHJ) had a poor week too tripping nearly 6.13%.
Health facility operators Ramsay Healthcare (ASX:RHC), Fisher & Paykel (ASX:FPH), and Healius (ASX:HLS) declined 8.75%, 4.50%, and 6.22%.
Medical device makers Cochlear (ASX:COH), Sonic Healthcare (ASX:SHL), Resmed CDI (ASX:RMD), and CSL Limited (ASX:CSL) tanked 11.48%, 4.02%, 4.04%, and 5.63%, respectively.
Biotech firms Immugene (ASX:IMU) and Mesoblast (ASX:MSB) closed lower by 12.74% and 11.54%; however, Polynovo (ASX:PNV) bucked the trend and closed 16.88% in the green after excessive buying from insiders.
ASX Telecom Index (ASX:XTJ)
The ASX Telecom Index (ASX:XTJ) fared relatively better, falling by just 2.49%, likely due to the twin factors of stability of demand inside a generally poor economic outlook.
Telstra (ASX:TLS), TPG Telecom (ASX:TPG), Uniti Group (ASX:UWL), and Chorus (ASX:CNU) ended 0.26% up, 2.74% down, 0.20% down, and 3.26% down, respectively.
Telecom infrastructure player Spark (ASX:SPK) also closed with losses of 2.35%.
ASX Utilities Index (ASX:XUJ)
Lastly, the ASX Utilities Index (ASX:XUJ) ended 4.58% in the red as power supply issues raged across the country.
The Australian Energy Market Operator (AEMO) on June 15 indefinitely suspended spot markets in all regions of its National Electricity Market (NEM), citing critical power generation supply shortfalls that it said made it “impossible to continue” operations under national electricity rules.
Sector players APA Group (ASX:APA), AGL Energy (ASX: AGL), and Origin Energy (ASX:ORG) closed 2.09%, 4.34%, and 7.97% down respectively, with Origin falling the most due to its exposure to power distribution.
This Week In ASX Stocks
There are no major earnings reports due next week.
New Listings
| Name | Ticker | Date | Price/Share | Amount Raised | Operations |
|---|---|---|---|---|---|
| Coolabah Metals | ASX: CBH | 22nd June Wednesday | A$0.20 | A$6 million | Mining and Exploration of base and exotic metals in NSW and QLD |
| Leo Lithium | AX: LLL | 23rd June Thursday | A$0.70 | A$100 million | Mining and Exploration at Lithium Assets in Mali |
| Odette Six Metals | ASX: OD6 | 22nd June Wednesday | A$0.20 | A$8 million | Rare Earth Mining and Development in Western Australia |
Market and Economic Outlook
The macro news of the week was the US Fed’s rate hike of 75 basis points, the biggest in 40 years, pushing the Federal Funds Rate to 1.5%.
The US reported a 0.8% jump in the PPI (Producer Price Index), which is a gauge of the costs of inputs used in production with 40% of the jump coming from rising energy and fuel costs.
In his statement, Fed Chair Powell made it clear that inflation would be tackled head-on and at all costs with growth expected to slow to 1.7% and unemployment likely to rise to 4.1%.
In the APAC region, Australia’s employment figures showed unemployment steady at 3.9% and job growth of 61,000 in May.
China reported better than expected economic figures – Industrial Production grew 0.7%, while retail spending fell just 6.7% year-on-year, still better-than-expected.
In the EU, the ECB held an emergency meeting to address the European market meltdowns and to strategize how they will deal with inflation and rising debt costs.
Next week, on Monday, China’s will declare its all-important Loan Prime Rate.
The RBA Meeting Minutes will publish on Tuesday.
On Wednesday, we have Existing Home Sales from the US and UK CPI for May.
On Thursday, we have the UK Composite, Services, and Manufacturing PMI along with Initial Jobless Claims from the US.
Lastly, on Friday we receive US Crude Oil Inventories and UK Retail Spending for May.
Fed Chair Powell is also due to testify before Congress on Thursday and Friday. Finally, on Saturday, the US reports New Home Sales.
Forex Outlook
AUD/USD
AUD/USD closed at 0.69363, well below the previous weekly close of 0.70418, and after touching a low of 0.68523 during the week.
The AUD/USD pair was afflicted by dollar strength at the end of the week from the Fed’s 0.75% bazooka rate hike, softness in resource prices including iron ore prices, and the seemingly endless Chinese lockdowns.
The global meltdown in equities is not helping a risk-on currency such as the AUD/USD, either.
Meanwhile, the US Fed is determinedly committed to a hawkish trajectory, and that could take a further toll on the pair.
Technically, the large red candle on the last day of the week (blue arrow) portends likely more weakness ahead.
It is entirely possible that the support line at 0.68500 may be taken out in the downtrend.
If that happens AUD/USD could quickly slide to 0.67000, a support line on the weekly time frame.
AUD/NZD
AUD/NZD ended the week at 1.09816, lower against the previous week’s close of 1.10731.
It made multiple tops at the 1.1677 line and finally plunged without retouching the upper channel line, marking a technical failure.
It also violated (black circle) the red 2-month support line joining the lows during that period.
Technically, AUD/NZD is likely to trend lower, encounter token support at 1.09422, and continue down to 1.08260.
