Australian equities fell for a fourth-straight day on Wednesday dragged down by losses in the materials sector on lower prices for oil and metals.
Wall Street posted a slight fall on Tuesday and futures indicated a soft start to trading, which played out across the region. The S&P/ASX 200 Index fell 35 points or 0.6 per cent to 5934, while the broader All Ordinaries index shed 36 points to 6012. The Australian dollar was knocked down almost 1?? on a weaker than expected quarterly wage index to US75.8??.
Miners were especially hard hit after metals prices dropped sharply in the London session leading into Wednesday's trade. Nickel sulphides miner Western Areas bore the brunt, slumping 5.5 per cent after nickel suffered a drop of 6 per cent on Tuesday night. Major miners BHP, Rio Tinto and Fortescue all fell by more than 2 per cent. Gold miners were the exception, with Newcrest Mining adding 0.8 per cent and St Barbara 3.6 per cent, suggesting a "risk-off" aspect to Wednesday's falls after an extended period of solid gains across global markets.
Nonetheless, "asset markets are currently caught in a heady mix - improving growth with little fear of higher interest rates," NAB global head of research Peter Jolly said.
The sell-off in oil was sparked by the International Energy Agency on Tuesday cutting its oil demand growth forecast by 100,000 barrels a day for 2017 and 2018, to an estimated 1.5 million bpd in 2017 and 1.3 million bpd in 2018, Reuters reported. Crude oil futures were 1.2 per cent lower to $US61.49 a barrel, falling for six of the past seven sessions.
Shares in the heavyweight banks eased as three in every five names in the top 200 ended the day lower. Australia's mortgage arrears fell to 1.02 per cent in the third-quarter according to Fitch Ratings, a 15 basis point decrease quarter-on-quarter and confirming the still-solid state of the country's mortgage market.
In corporate news, DuluxGroup rallied 6.1 per cent on its full-year results, forecasting 2018 net profit to be higher than 2017, and new housing construction - which accounts for 15 per cent of revenue - "to remain relatively strong".
However Australian Agricultural Company dropped 7.4 per cent on its first-half results which swung to a loss of $37.7 million after marking-to-market the value of its livestock inventory. Meat sales fell 26 per cent and cattle sales rose 9.1 per cent.
Bucking the broad sharemarket trend was Aconex, up 5.1 per cent, its best day since June. Qantas Airways was a winner on the dip in oil, advancing 2.8 per cent.
Stock watch
OFX Group
Deutsche Bank, which has a hold recommendation on the stock with a $1.40 price target, found that Ozforex is finding the macro environment challenging, characterised by low volatility and a higher Australian dollar versus the previous corresponding half. "Strong operating metrics" were observed, "however, this is yet to convert into earnings growth largely driven by declining average transaction values", down 4.1 per cent. It appears that Brexit in June 2016 was a source of higher margins for the business and those look difficult to top. According to Ozforex, Brexit was "followed by long depreciation which depressed margin and activity". More positively, active clients were up 5.1 per cent half-on-half and transactions were up 12.2 per cent. It will pay a dividend of 2.4?? a share on December 15. OFX shares lost 1.4 per cent on the day to $1.38.
What moved the market
More millionaires
The number of Australian millionaires in US dollar terms grew by 200,000 in Credit Suisse's latest global wealth report, the third largest increase by country after the US and Germany. The number of ultra-high net worth individuals in Australia - people with more than $US50 million - increased by around 30 per cent, to almost 3000 people, ranking Australia in sixth position in that category. "Australia's wealth per adult in 2017 remains the second highest in the world after Switzerland, having increased by 9.5 per cent to $US402,603," the 2017 edition finds. High property prices contributed.
Wage index
Wage index growth of 2 per cent in the third quarter from 1.9 per cent in the second quarter shows that outside of the minimum wage hike there was little joy for the workforce. "The result is actually very disappointing and suggests that underlying wage pressures probably eased further," said Capital Economics economist Paul Dales. "Wage growth did rise in most of those sectors that have a higher share of employees on the minimum wage, such as accommodation" - 2.2 per cent versus 2.1 per cent - "and admin and support" -1.7 per cent versus 1.3 per cent. The retail sector was weak.
Christmas cracker
The Westpac Melbourne Institute Index of Consumer Sentiment declined 1.7 per cent to 99.7 in November from 101.4 in October. "Constant media coverage around the prospect of rising interest rates may be unnerving households. The confidence of respondents who hold a mortgage fell by 4.5 per cent compared to a more modest fall of 1.4 per cent for those owners who are mortgage free and a 0.5 per cent increase for tenants," said Westpac chief economist Bill Evans. "Just under" one third of Australians expect to spend less on gifts this year than in 2016, with 54 per cent expecting to spend "about the same" and 11 per cent "spending more".
Australian dollar
The currency is on track for its worst session in seven days. The wage index data released on Wednesday sent the Australian dollar tumbling from around US76.30?? to US75.80??. It settled at around US75.89??. "Despite the RBA's optimism that there are pockets of firmer wages growth emerging from their liaison, [the data is] likely to rattle their confidence somewhat," argued RBC strategist Su-Lin Ong. "While the governor has suggested that the next move is probably up, for the RBA to think about policy normalisation, it will need to have greater confidence that wages growth and inflation are eventually heading higher."
