Australian shares drop with Federal Reserve hike

·4-min read

The local share market has closed slightly in the red after an overnight rate hike by the US Federal Reserve, but has managed to claw back most of its morning losses.

The benchmark S&P/ASX200 index finished on Thursday down 4.3 points, or 0.06 per cent, to 7,193. It had been down by as much as 0.8 per cent in early trading.

The broader All Ordinaries was basically flat, down by 0.8 point, or 0.01 per cent, to 7,388.

Rates in the US increased by 25 base points to 5.25 per cent in what the Federal Reserve hinted could be its final rate hike.

"That's a meaningful change, that we're no longer saying 'we anticipate' (more rate hikes)," chair Jerome Powell said.

City Index senior market analyst Matt Simpson said the market's reaction to the overnight hike was "a repeat of what we've seen when the Fed hikes say they might hike some more".

"They tell the markets to forget to do any further cuts and the market didn't believe them," he told AAP.

"So come a combination of a weak lead from Wall Street, geopolitical risks brewing in the background and concerns over US debt and the bank sector put the market below 7,200 today - of course, a week earnings report from NAB didn't help either."

The ASX's financial sector closed deep in the red, down by 2.52 per cent with all big banks experiencing drops.

NAB plunged by 6.4 per cent to $26.72 despite announcements its cash profits had improved by 17 per cent to $4.07 billion, slightly below analyst estimates.

Meanwhile, CBA dropped 2.6 per cent to $95.76, Westpac 4.1 per cent to $21.25 and ANZ 2.4 per cent to $23.46.

Out of the ASX's 11 sectors, the property trusts sector finished best, up by 1.95 per cent while the heavyweight mining sector finished strongly rising by 1.24 per cent, alongside energy by 0.1 per cent and industrials by 1 per cent in the green.

BHP jumped 1.6 per cent to $$43.97, Rio Tinto rose 1.3 per cent to $110.14, and Fortescue by 1.5 per cent to $20.28.

Left in the red was Mineral Resources, down by a dramatic 4.6 per cent to $68.63.

Woodside Energy was up by 0.1 per cent to $32.95 with Santos up by 1.9 per cent to $7.10, while coal miners Whitehaven Coal and Yancoal were down 2.5 per cent to $7.01 and 2.3 per cent to $5.42, respectively.

Super Retail Group was down 7.14 per cent to $12.49 after the Supercheap Auto, Rebel Sports, BCF and Macpac owner told the Macquarie conference that its gross profit margins had slipped in the second half.

"Offshore freight costs have returned to pre-pandemic levels, however inflationary pressures on wages, rent and energy expenses will impact group (cost of doing business) in the second half," CEO Anthony Heraghty said.

Mr Simpson expects the next month to be a tough period for the market, leaning into the typical "sell in May and go away" mindset.

"Over the next few weeks, we could expect some choppy price action at best and we might even see the ASX move close to that 7,000 level due to global uncertantities," he said.

"It's a typical time of the year for equities to have a bad time and we're waiting really to see again what's going to be the next shoe drop in the US banking sector."

The Australian dollar was buying 66.83 US cents, from 67.07 US cents at Wednesday's ASX close.


* The benchmark S&P/ASX200 index finished Thursday down 4.3 points, or 0.06 per cent, to 7,193.

* The broader All Ordinaries dropped by 0.8 point, or 0.01 per cent, to 7,388.


One Australian dollar buys:

* 66.83 US cents, from 67.07 US cents at Wednesday's ASX close

* 89.76 Japanese yen, from 90.62 Japanese yen

* 60.21 Euro cents, from 60.41 Euro cents

* 53.03 British pence, from 53.26 British pence

* 106.99 NZ cents, from 106.95 NZ cents.