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Chapter 1: What is the main topic discussed in this episode?
A listener production.
The Aussie market remains tentative as the Middle East conflict heats up and mining stocks have slumped by 9% in just four days. Good afternoon, I'm Steve Daglian. It's Wednesday the 10th of June. Welcome to the CommSec Market Update. Good afternoon, everyone.
Chapter 2: What factors are influencing the Australian share market today?
A much better day for the Aussie market, even though things have been a little choppy throughout the session, at least as we head into the close. We do have the ASX 200 up by about 0.4%, not a bad effort. Right on the open this morning, the market was completely flat, unsure which way to head.
And at the best levels at around 11am, we're up around twice that amount, so around 0.8% at the best level. So we have certainly faded a from that point. There are a few things happening in markets, which I think are just keeping investors on edge somewhat. One is caution ahead of an important update on inflation in the United States, which is due tonight ahead of the US market opening.
Now, this is a week out from the Federal Reserve's next decision on interest rates in America. And also just days after that much stronger than expected update on US jobs growth, which at the end of the day has just seen the market now anticipating one interest rate hike in the US by December this year and has taken rate cuts off the table, it seems, as far as what markets are pricing in.
So a week ago, the market thought that there might be an interest rate hike in the United States by March next year. Secondly, also tempers are flaring again in the middle East, which is really helpful for markets, something that we are still seeing markets reacting to, even though we've seen, of course, headlines in both directions over the past few months.
But what happened this morning was the US struck Iran in what President Trump called an act of self-defense, and this was in retaliation for the downing of a US Apache aircraft. helicopter while it was patrolling over the Strait of Hormuz. And then reports of Iran also launching missiles at a US base in Jordan too. So this is keeping markets a little cautious.
Futures as well, suggesting a lower start for US markets seems likely tonight when they reopen. Remember, though, that yesterday we had our third straight daily decline, and it was a very volatile start to the holiday-shortened week. So we did well to actually only decline by around a quarter of a percent on Tuesday, even though at one point we were down by around 1.6% at the lowest levels.
And again, that was largely in response to the Stronger Jobs report in America. which a refresher, it was about twice as strong as what the market was expecting. And there was also an upgrade to the April numbers. So this has just been feeding into the concerns of higher inflation in the US and something that might see the Federal Reserve need to raise interest rates rather than cutting them.
Now, as far as sectors are concerned today, a real mixed bag. There are three sectors that are in the red at the moment. The worst performers are tech stocks locally, which are down 2.3%. We have seen a little bit of a decline in some of those major tech stocks in the United States, but this is a tiny sector locally for us here.
What's having a greater impact on the ASX 200 is the mining and energy sectors. Mining stocks are down about 1.1%, and we've also got declines of approximately 0.1%. 9% for the energy sector. So commodity prices have certainly taken a little bit of a knock, and that has been a weight, of course, on many of these major stocks. So we'll get to that in a second.
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Chapter 3: How are Middle East tensions impacting market performance?
We're also seeing gains coming through from some plumbing products companies, likes of Reese, which is up around 8.5%, and Reliance Worldwide, which is also lifting in the order of 4%. to 5% for most of the day.
And the market being a little more defensive today has seen some of those defensive names like the supermarket chains, Coles up around four and a half, Woolies up around three or so, Endeavor Drinks, that's the group behind Dan Murphy's and BWS, the liquor chains also managing to jump as well. And we are also seeing West Farmers managing to jump around 4.2%.
So this is the group that owns Bunnings, Kmart, Target, Officeworks. It updated investors on its strategy at an annual event in Sydney today. Now, there is still a long list of losers on the market today. So as I said, commodity prices have generally gone backwards. And the expectations of a rate hike in the US this year has just seen the US dollar strengthen significantly.
but also the Middle East conflict has seen the greenback strengthen as well. So that's something that can weigh on commodity prices because commodities are denominated in US dollars for the most part. So that's a reason why some of the worst performers are stocks like Aurobanda Mining, a gold miner, which is down around 9.5% today, six straight day of declines there.
Also, Bellevue Gold is falling for a fifth consecutive day. We've got Resolute Mining yet to have one daily lift this month. So it is down quite heavily today. as well. Oil prices, on the other hand, have been quite messy. They've been all over the place. They did fall last night.
They did a little better in Asia trade, partly because of the US attack on Iran, but they've calmed a little over the course of the afternoon. One of the Harder hit stocks on the market today is Sigma Healthcare. The chemist warehouse operator confirmed media speculation today that it is in fact in early talks for a potential acquisition of a company called Boots.
And this is a UK-based health and beauty retailer. A few years ago, this company was basically valued at as much as $14 to $15 million. billion Aussie dollars. So I guess the prospect of a costly takeover has just seen the share price take a little bit of a knock. And also IGO, the miner is down in the order of 6% today.
So FIRE broke out at a lithium operation yesterday in WA and it confirmed that the FIRE has indeed been extinguished. No injuries were sustained. It also confirmed that its production goals remain intact for the year. but also that there's an assessment on the impact and required repairs that will be carried out.
So the stock did drop back on the news today, but also, of course, we've got to remember that the broader material space is coming under quite a bit of selling pressure today. So Let's take a look forward. There will be a few things to watch in overnight trade.
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Chapter 4: What are the implications of US interest rate expectations on the ASX?
Certainly, the big one is going to be that US inflation data, which will be out at 10.30pm Eastern Standard Time. But we also get a weekly update on crude oil inventories. And this is a weekly update on how much oil is being held in the US at the moment. And it does have a habit of moving oil prices around. So that's going to be one to watch. Tomorrow, we've got Champion Iron trading ex-dividend.
We've got the Melbourne Institute coming out with an update on inflation expectations. And we know every time inflation is mentioned, markets pay a lot of attention to that. And we also have a super retail group delivering an update to the market tomorrow too. So that's probably going to be another one to watch. This is a company that owns Super Cheap Auto, Rebel, MacPak, BCF.
It has not done particularly well on the market this year, dropping around 30% or so. And some brokers over the past couple of months have been downgrading expectations just broadly for a number of retail stocks because of three rate hikes, lower consumer confidence, concerns that this could lead to a reining in in spending. So this is just something to consider and something to certainly watch.
So I think that wraps it up. Make sure to tune into the morning podcast tomorrow to get you up to speed with everything that happens in overnight trade and get you set for the day ahead as well. Have a good one.
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