The ASX wrapped up an eventful third quarter on a quieter note on Friday as investors pushed the index to mild gains in holiday-thinned trading.
The benchmark S&P/ASX 200 index ended the day up 11 points, or 0.2 per cent, at 5682. For the month it ended with a 0.6 per cent loss and it ended the quarter with a 0.7 per cent loss. The broader All Ordinaries index is down 0.3 per cent since June 30 and ended Friday’s session up 0.2 per cent at 5745 points .
This week was one of the quietest of the year as the market traded sideways during school holidays and a selection of state public holidays, CommSec market analyst Steve Daghlian noted.
That sideways pattern has been a feature of ASX trading since the middle of May. The index has been unable to break out of a rough 100-point range although a recent handful of lower closes “makes it a bit vulnerable at these levels,” noted Mr Daghlian.
Commonwealth Bank weighed heavily on the market over the three months, dropping 9.1 per cent, after facing allegations of breaching rules aimed at preventing money laundering. Also contributing heavily to the index losses over the quarter were telecoms, which put in by far the worst quarterly sector performance, losing 18.6 per cent.
Some of that loss can be assigned to market heavyweight Telstra, which slid to a five-year low this week as investors continue to fret about the telco’s dividend prospects as it grapples with the introduction of the National Broadband Network.
The telecommunications sector can also be favourite for yield hunters and during the quarter stocks attractive for their yields fell out of favour, Mr Daghlian noted, as bond yields rose and interest rate expectations shifted higher.
Markets are currently pricing in another rate hike in the US in December and perhaps more surprisingly some economists are starting to suggest that the Reserve Bank of Australia could lift its cash rate target twice next year.
The Australian dollar hit a two-year high of more than US81¢ in the quarter, although the currency has since fallen back to US78.4¢ as investors try and take gyrations in commodity prices – particularly iron ore – into account.
The mining and energy sectors put in solid performances over the September quarter with BHP up 10.7 per cent, Rio Tinto up 5.2 per cent and Santos jumping 33 per cent. It wasn’t all plain sailing however, with Fortescue Metals down 1.5 per cent and Woodside down 2.6 per cent in the three months.
With October typically a good month for markets, “there’s a chance that markets can bounce back,” Mr Daghlian said.
Still, there are plenty of risks as well, he said, such as the concerns over North Korean hostilities that have worked to dampen sentiment during the third quarter.
Good news for Costa Group investors: sharper citrus export prices are likely to outweigh cheaper berries. While most of us have been enjoying loading up on cheap punnets of strawberries and blueberries, that has been less good news for growers like Costa. “We still think that deflation in blueberries is likely,” write JP Morgan analysts. But “the potential for higher citrus export pricing to offset margin declines in the berry category leads to our change in view [from “underweight” to neutral”] as we now have no clear negative catalyst,” they write. Costa is Australia’s number one producer of citrus. The broker’s upgrade has provided the last fillip to one of the ASX’s rare successful IPOs in recent years. The stock was up another 6.7 per cent on Friday to $5.58, taking its year-to-date gains to over 60 per cent.
China iron ore futures are on pace for their biggest monthly decline since May 2016 amid increasing concerns about demand as government inspections have curtailed steel production and ample inventories. Dalian Commodity Exchange’s most-traded iron ore contract, for January delivery, was down 2.2 per cent on Thursday night, bringing it’s losses for the month to over 20 per cent. Over the quarter it’s down 3.2 per cent. “The market is concerned about both rising supply and lower demand from China as it curbs local iron plants and steel mill activity,” ANZ analysts said.
Wheat is facing its biggest quarterly decline in two years as record world supplies dragged down prices, although concerns over higher quality wheat production are likely to prevent further losses. The Chicago Board of Trade most-active wheat contract is down almost 14 percent between July and September, the biggest fall since the third quarter of 2015. For the month, wheat has gained about 4 percent, its first monthly gain in three. “At the top level, the wheat balance sheet is not problematic. The thing to watch is when you break it down to class and quality. There is ongoing reduction in high-protein wheat,” INTL FCStone’s Brett Cooper said.
Asian stocks outside Japan were mostly higher on the final trading day of what’s been a strong quarter, with emerging markets coming under pressure. Japanese shares edged lower, while they rose in South Korea and Hong Kong. Volumes were subdued on the last day of the quarter and ahead of some major markets, including China, shutting next week for a holiday. The MSCI Asia Pacific Index was little changed after falling for six days in a row before Friday. Still, it is set to complete its third quarterly gain, the best run since the end of the first quarter 2013.
The value of mergers and acquisitions globally dropped slightly in the third quarter of 2017, as big deals worth more than $10 billion were scarce given uncertainty about economic policy in the US and Europe in particular, leaving dealmakers to feast on a plethora of smaller transactions. Even as major stock markets continued to climb higher, big companies were wary of pursuing transformative deals in the quarter, as the future of US President Donald Trump’s agenda on taxes, healthcare and infrastructure spending remained unclear, while Britain’s Brexit talks, and North Korean’s nuclear ambitions also weighed on chief executives’ appetite to take risks.
– With wires