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ASX inches lower; French and UK stocks take spotlight amid elections
By Millie Muroi
Banks and miners dragged the Australian sharemarket lower on Friday despite a positive lead from the European market and Wall Street taking a breather for the July 4 holiday.
The S&P/ASX 200 Index fell 11.4 points, or 0.2 per cent, to 7820.4 at about 1pm AEST. The Australian dollar was stronger, fetching US67.35¢ as traders mulled the possibility for a Reserve Bank rate hike in August and a rate cut by the US central bank following a string of softer-than-expected economic data.
European markets took centre stage with Wall Street closed.Credit: Getty Images
Safe haven stocks were among the best performers on Friday with consumer staples (up 0.04 per cent), healthcare (up 0.6 per cent) and utilities (up 0.1 per cent) sectors trading in the green. Woolworths (up 0.3 per cent), Sonic Healthcare (up 1 per cent) and Origin (up 0.5 per cent) were all stronger.
The energy sector (up 0.1 per cent) was buoyed by the strength of coal miners with Yancoal (up 1.7 per cent) the biggest large-cap advancer, continuing a rally by Australian coal stocks this week following a fire at rival Anglo American’s Australian coal projects. BlueScope Steel (up 1.6 per cent) and Mineral Resources (up 1.2 per cent) rounded out the top three megacap performers.
Meanwhile, miners (down 0.4 per cent) and financials (down 0.3 per cent) were the weakest sectors. Iron ore heavyweights Fortescue (down 0.7 per cent), BHP (down 0.9 per cent) and Rio Tinto (down 0.6 per cent) also dragged the index lower along with three out of the four big four banks. The country’s largest bank, CBA, lost 0.5 per cent.
Seven Group Holdings (down 3.8 per cent) was the biggest large-cap decliner, followed by boutique investment firm GQG Partners (down 3.3 per cent) and medical equipment supplier EBOS (down 1.2 per cent).
European stocks rose as key elections held centre stage and investors grew more optimistic about Federal Reserve interest rate cuts following US economic data that supported the case for easing.
French stocks outperformed, boosting the broader market, as polls showed Marine Le Pen’s National Rally and its allies would fall well short of an absolute majority in Sunday’s French parliamentary election. The UK’s FTSE 100 was up 0.9 per cent, with the Labour Party seen winning elections by a landslide.
The gains also follow a strong close in US markets that drove the S&P 500 and Nasdaq 100 to fresh records on Wednesday.
The CAC 40 Index rose 0.8 per cent by the close as polling and market research firm, Ifop, said the far-right group was on course to win between 210 and 240 of the 577 seats in the National Assembly, meaning it would lack the 289 lawmakers needed to pass bills easily and push through its agenda.
Morgan Stanley strategists, meanwhile, advised buying French stocks, predicting the market to recover after the election.
The pan-European Stoxx 600 Index gained 0.6 per cent, with banks and energy stocks outperforming. The retail sector underperformed.
“UK elections should really be a non-issue for markets as, unless there’s a big surprise, it is already priced in,” said Diego Fernandez, chief investment officer at A&G Banca. “In France, markets seem to be quite complacent this week, but we will be ready to buy in any weakness should Sunday’s results bring more declines.”
Investors will now closely watch Friday’s US jobs report, with economists anticipating a 190,000 gain in June non-farm payrolls, less than the previous month, potentially allowing the Fed to cut rates in September.
The vote outcome is “marginally positive as tighter ties with Europe will be beneficial to domestic consumption,” said Gilles Guibout, a Paris-based portfolio manager at Axa IM. “It may also open, although very gradually, more opportunities for some stock pickers wanting to diversify in terms of country.”
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