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The Australian sharemarket pulled back from near 11-month highs on Monday as investors dumped gold, tech, and travel stocks, while the iron ore giants were also subdued.
The ASX 200 began trade at its highest since February last year, but soon retreated and shed as much as 1 per cent.
Wall Street had set a platform for further gains, with the major US indices closing the week at new records.
But only a handful of local companies finished Monday’s session in front as the benchmark index tracked a declining US futures market to a close of 6697.2, falling 0.9 per cent.
ACY securities chief market analyst Alistair Schultz said investors were perhaps questioning whether valuations had run too hot after a strong start to the year.
“I think people are looking on with a lot of caution at the moment,” Mr Schultz said.
“You have this idea about FOMO – the fear of missing out – but then you’ve also got FOGO – the fear of getting out.
“I am concerned at some stage big investors will see valuations as too high, pull out, and cause a bit of hysteria”.
Energy stocks extended gains on improved oil prices, while insurers Suncorp and IAG also rose, but there was little else to cheer as investors took a breather from last week’s stimulus-fuelled surge.
Gold miners plunged as the precious metal dived back below $1850 an ounce, while BHP, Rio Tinto, and Fortescue Metals continued Friday’s decline.
The big banks sagged, with Commonwealth Bank dropping 0.6 per cent to $85.16.
CSL, Wesfarmers, Woolworths, Transurban were also among the heavyweight losers, while Afterpay led a wider tech sector decline with a 1.7 per cent drop to $113.99.
Travel firms including Qantas, Flight Centre, Corporate Travel, and Webjet each fell as states antagonise each other over COVID border closures.
Mesoblast was the best local performer, gaining 14.3 per cent after confirming it will meet with US regulators to try to get its heart attack treatment approved.
The ASX 200 finished Monday’s session 0.9 per cent lower at 6697.2, pulling back from Friday’s near 11-month high.
Gold miners and tech stocks sagged. Rio Tinto, CSL, and Woolworths underperformed, while Commonwealth Bank, NAB, BHP, Wesfarmers, and Fortescue Metals were also lower.
The E-mini S&P 500 and Dow futures markets were each 0.6 per cent lower at Monday’s ASX close, while the Nasdaq E-mini had fallen 0.5 per cent.
Mesoblast shares jumped 14 per cent this afternoon after the stem cell giant confirmed to investors it will meet with the FDA to try to get its heart attack treatment approved – despite its study missing its primary goal late last year.
The stem cell treatments maker hit highs of $2.58 after the company revealed further data from its phase 3 study into the effectiveness of rexlemestrocel-L.
In December, Mesoblast revealed this trial did not hit its primary endpoint, which was to show that the drug reduced the number of hospital visits for non-fatal cardiac events among its participants.
Mesoblast claimed there was a silver lining, however – the data did suggest those that took the drug had reduced likelihood of death from a serious cardiac event in some cases.
On Monday afternoon the company told investors additional data from the trial suggests the product “resulted in substantial and durable reduction in heart attacks, stroke and cardiac death”.
“Based on the observed reduction in mortality and morbidity in this phase 3 trial, Mesoblast intends to meet with the FDA to discuss a potential approval pathway,” the company said.
Mesoblast will be hoping for better news to kick off the new year after a horror end to 2021 which included the news that its COVID-19 treatment trial had failed.
It’s still in discussions with the US regulator over whether its flagship product, Ryoncil, should be approved for children with graft-versus-host disease.
Former Leighton Holdings executive David Savage has been arrested over his alleged role in the international Unaoil scandal, which involved bribery of senior officials in oil-producing nations to secure lucrative contracts.
Mr Savage, the former chief operating officer of the prominent Australian infrastructure firm, was arrested by Australian Federal Police officers upon his release from hotel quarantine in Sydney’s CBD on Monday morning.
The arrest of Mr Savage, 60, is a major development in Australia’s longest-running bribery investigation, focused on Leighton’s bribery of Iraqi officials in order to win oil pipeline construction contracts.
The investigation has discovered approximately $US77.6 million in suspicious payments channelled through Monaco-based consultancy Unaoil and other third parties.
The ASX 200 slipped further after lunch, but the local energy sector has extended its impressive run into a fourth straight session.
Energy stocks were up 1 per cent and have risen a collective 8.8 per cent since last Tuesday, as oil prices continue to climb following surprise Saudi production cuts a week ago.
Brent crude added 3 per cent to $US55.99 a barrel on Friday – the highest since February last year – and US oil jumped another 2.8 per cent to $US52.24 a barrel.
On Monday, Woodside Petroleum was 3.1 per cent higher at $25.59, Santos rose 3.1 per cent to $7.20, and origin Energy jumped 0.8 per cent to $5.16. Whitehaven Coal climbed 2.2 per cent to $1.62.
The wider ASX 200 had fallen by 1 per cent at the same time.
Saudi Arabia’s pledge last week to cut output followed a meeting of the OPEC+ alliance, where small increases in output for producers such as Russia and Kazakhstan were agreed.
The group had been pushing for the curbs to be eased as the economic backdrop improves amid the ongoing stimulus measures and the rapid rollout of coronavirus vaccines.
“Nevertheless, the move by Saudi Arabia to make further cuts outside of the current supply agreement shatters the long-standing assumption that OPEC producers must shoulder the curbs equally,” ANZ wrote on Monday.
“This caught out many investors who had been betting that OPEC+ would increase supply, just as the resurgent COVID-19 forces further lockdowns around the world. The subsequent closing out of these shorts further boosted prices.”
Energy stocks were among the hardest hit during 2020 – falling a collective 30 per cent during the year – as the coronavirus pandemic and associated lockdowns, travel restrictions, and industrial slump melted the demand for fuel.
When Nationals politician John Anderson released a policy called Plantations for Australia: The 2020 Vision back in 1997, he had no idea how nightmarish that vision would turn out to be.
Instead of creating thousands of hectares of environmentally friendly native forests and a thriving timber industry, one ASX-listed company has been left with a charred mess and no easy way of cleaning it up.
This is a story of some of the worst government decisions in recent history crashing into the extreme heat of the 2019-20 summer.
The drama is set about 200 kilometres south-west of Adelaide on Kangaroo Island, a flat land mass 155 kilometres wide and one-third as long with above average rainfall and mild summers. And it starts with the Keating government’s National Forest Policy Statement of 1992, which stated places like Kangaroo Island were great for growing timber.
Asian shares took a breather on Monday while Treasury yields were at 10-month highs as “trillions” in new US fiscal stimulus plans were set to be unveiled this week, stoking a global reflation trade.
Investors were keeping a wary eye on US politics as pressure grew to impeach President Donald Trump, though signs were an actual trial could be some time away.
MSCI’s broadest index of Asia-Pacific shares outside Japan dipped 0.2 per cent, having surged 5 per cent last week to record highs.
Japan’s Nikkei was on holiday after closing at a 30-year high on Friday.
South Korea went flat after an early jump, and Chinese blue chips firmed 0.7 per cent.
“Asia has come through the second global crisis this millennium with its credentials,” said ANZ chief economist Richard Yetsenga.
“Asia’s growth is stronger, with for the most part better demographics and debt levels, than advanced economies.”
He noted a turnaround in fortunes between the semiconductor and energy sectors highlighted Asia’s success, given the region produced around 45 per cent of the world’s semiconductors.
“For the first time the global semiconductor sector’s market capitalisation has surpassed energy,” he said. “At the time of the last crisis, 12 years ago, the energy sector was more than five times larger.”
Futures for the S&P 500 slipped 0.6 per cent from all-time peaks, after gaining 1.8% last week.
EUROSTOXX 50 futures eased 0.1 per cent and FTSE futures were flat.
Fruit and vegetable grower Costa Group on Monday wilted from near 18-month highs as investors digest a rating downgrade by Citi analysts on Friday.
Shares in the company were last down 4 per cent to $4.12 after Citi cut the firm from Buy to Neutral “given the substantial share price rise in calendar 2020”.
Costa Group shares gained 65 per cent in 2020 against a slight decline for the wider ASX 200. Last week the company hit a more-than 18-month high of $4.48.
“The company has benefited from more stable growing conditions in all its markets and there is more upside in FY21e,” Citi wrote to clients.
“However, the stock has re-rated and we are more cautious on the prospects for sustained earnings upgrades from here.”
Citi did lift the company’s 12-month price target from $3.75 to $4.30, while it also improved its earnings forecasts to reflect higher citrus export prices, which are up over 60 per cent in some key markets.
However, there are partial offsets from weaker prices in mushrooms, higher potential costs in Morocco in 2021 and higher rent costs.
“We believe Costa remains well-positioned to benefit from better growing conditions and higher prices in some produce categories,” Citi wrote.
“However, the fundamentals in berries are still mixed with elevated supply likely to restrict growth in margins.”
The materials sector is proving a significant weight on the ASX 200 with BHP shedding its earlier lead to join Rio Tinto, Fortescue Metals, and the gold miners in the doldrums.
The miners have been a major force behind the market’s strong start to the year, but the major players cooled from record highs on Friday and look set to finish Monday in the red as well.
BHP was last 0.1 per cent lower at $46.63, Rio Tinto 1.4 per cent down at $122.32, and Fortescue Metals 0.5 per cent lower at $25.23.
The drop comes even as iron ore improved 0.8 per cent to $US173.06 a tonne.
The price of gold plunged more than 3 per cent to below $US1850 an ounce, with the local gold miners predictably feeling the pinch.
Newcrest was down 4.1 per cent lower at $26.16, Northern Star 3.9 per cent lower at $12.67, Evolution shedding 5.4 per cent to $4.69, Saracen 4.7 per cent behind at $4.77, and Westgold Resources among the worst of the lot – down 8.1 per cent at $2.45.
The ASX 200 slipped by as much as 0.7 per cent on Monday even after Wall Street finished the week at record highs.
US E-mini futures were down by between 0.3 per cent and 0.4 per cent just after lunchtime AEDT.