Consumer staples, discretionary stocks boost ASX including Wesfarmers despite Kmart, Target sales dip
The Australian sharemarket climbed higher despite weakness in the all-important resources sector, with consumer stocks leading the charge, while a new entrant tanked.
The benchmark S&P/ASX200 index rose 0.32 per cent to 7417.3, while the All Ordinaries Index gained 0.29 per cent to 7739.3.
IG market analyst Kyle Rodda said better than expected Chinese GDP data hadn’t been enough to lift investor spirits in Asia, with sentiment remaining quite mixed and volatility in bond markets keeping them on edge.
There will be no lead from Wall Street on Tuesday, with US markets closed for the Martin Luther King holiday.
“However, with bond markets still trading, speculation about Fed policy – especially as it relates to the central bank’s balance sheet – will probably be a focal point for market action,” Mr Rodda said.
OMG chief executive Ivan Tchourilov said the local market seesawed early, only to come back later in the day.
Consumer goods were up, both staples and discretionary, Mr Tchourilov said.
“Wesfarmers’ half-year results update, which outlined a 10 per cent fall in revenue from Kmart (and Target), actually fell in line with market expectations and moved the share price higher,” he said.
The conglomerate forked out extra cash to keep stock levels high in a bid to counter global supply chain disruptions.
But high levels of pandemic-related absenteeism in key NSW and Victorian distribution centres prevented the delivery of enough product to stores to meet customer demand.
This calendar year has so far proved just as tough, with customer traffic to stores remaining “subdued” while ongoing staff absenteeism has necessitated trading hours cuts in some stores and affected stock availability, Wesfarmers said.
Wesfarmers put on 2.56 per cent to $55.38, Woolworths added 1.26 per cent to $35.45, Coles firmed 0.25 per cent to $16.39, JB Hi-Fi lifted 3.48 per cent to $46.69 and Super Retail Group was up 2.6 per cent at $12.22.
It was a dismal ASX debut for Beforepay Group, which offers workers early access to a portion of their next pay in exchange for a 5 per cent fee, tumbling 44.14 per cent to $1.90 despite providing a positive trading update.
Mr Tchourilov said the energy sector was back in the green after a correction on Friday.
“We’ve pretty much pared Friday’s losses, with the energy index now fighting to break out above Thursday’s close, which was the highest since October,” he said.
Strike Energy rallied 7.5 per cent to 21.5 cents after starting to drill the first well at its South Erregulla gas target in Western Australia over the weekend.
Mr Tchourilov said the mining industry index dropped more than 80 points in its first correction after gaining nearly 400 over the past seven trading sessions.
“Westpac noted on Friday that they don’t see the current $US120 per tonne iron ore price being sustainable as we head into the Beijing Olympics,” he said.
Rio Tinto weakened 0.5 per cent to $110.03, BHP fell 1.14 per cent to $46.15, Fortescue backtracked 2.8 per cent to $20.77 and Mount Gibson Iron backtracked 4.26 per cent to 45 cents.
South32 erased 3.11 per cent to $4.05 after providing an update on the progress of its Hermosa zinc-lead-silver project in the US, estimating it will cost $US1.7bn ($A2.36bn) to develop.
Mr Tchourilov said rising US interest rates should put some upward pressure on the US dollar, reducing gold prices.
“Last week’s Thursday and Friday drop in the spot price weakened gold miners in today’s trading session,” he said.
Perseus Mining dropped 5.06 per cent to $1.50, Northern Star gave up 2.15 per cent to $9.10 and Australia’s biggest producer of the precious metal, Newcrest, declined 1.2 per cent to $24.41.
Mr Tchourilov said Adbri jumped 7.17 per cent to $2.99 after subsidiary Cockburn Cement extended a contract to provide quicklime to NYSE-listed Alcoa Corp, the world’s biggest bauxite miner.
“Adbri’s share price fell 28 per cent in one trading session during 2020 when Alcoa initially announced it wasn’t renewing a long-standing contract, which made up $70 million in revenue for Adbri,” he said.
“Despite the new contract only coming in at a maximum of $35 million in revenue, renewed relations will hopefully lead to bigger contracts in the future.”
ANZ gained 1.16 per cent to $28.72, Commonwealth Bank improved 0.3 per cent to $101.16, National Australia Bank firmed 0.24 per cent to $29.45 and Westpac inched two cents higher to $21.47.
The Aussie dollar was buying 72.04 US cents, 52.68 British pence and 63.08 Euro cents in afternoon trade.
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