Sydney market commenced trading with back footing on tracking fall in the Wall Street overnight on disappointment that the U.S. Federal Reserve is unlikely to cut rates again in the near future. Overnight, the Federal Reserve cut rates by 25 basis points in a widely expected move, citing global developments and muted inflation as reasons, but signaled caution on future interest-rate cuts. Some investors are betting on more than one rate cut this year, and while the Fed's policy statement left the door open for the Fed to reduce rates again, Federal Reserve Chairman Jerome Powell suggested Wednesday that this cut wasn't the beginning of a long easing cycle.
The Fed's decision came on the same day as another round of US-China trade talks concluded with few signs of concrete progress. The two sides conducted frank, efficient and constructive in-depth exchanges on major economic and trade issues, according to Chinese media reports. The White House said Wednesday that both sides discussed topics such as forced technology transfer, intellectual property rights, services, non-tariff barriers and agriculture. U.S. and Chinese trade negotiators plan to meet again in early September 2019. U.S. President Donald Trump and Chinese President Xi Jinping reached a truce in June at the G-20 summit in Japan after trade talks collapsed in May that prompted a steep U.S. tariff hike on $200 billion of Chinese goods.
A private survey showed Chinese factory activity contracted in July. The Caixin/Markit factory Purchasing Managers' Index came in at 49.9. PMI readings above 50 indicate expansion, while those below that signal contraction. That number came after official data released Wednesday showed Chinese factory activity contracting for the third straight month in July.
Shares of materials declined, with BHP Group and Rio Tinto down more than 1% each, while Fortescue Metals lost almost 2%.
Gold miners are sharply lower after gold prices declined overnight. Newcrest Mining is losing almost 4% and Evolution Mining is lower by more than 4%.
Shares of financials were mostly higher, with among the big four banks, ANZ Banking, National Australia Bank and Westpac higher in a range of 0.4% to 0.5%, while Commonwealth Bank was lower by 0.5%.
Shares of energy companies were mixed even as crude oil prices rose overnight. Crude oil prices rose on Wednesday to extend gains for a fifth straight session, with bullish inventory data and expectations surrounding a Fed rate cut helping underpin investor sentiment. WTI crude for September ended up $0.53 or about 0.9% at $58.58 a barrel. Santos was down 0.2% while Woodside Petroleum was up 0.1%.
Shares of Qantas gained 0.4% after the company has put on hold its plan to acquire a majority stake in ASX-listed regional rival Alliance Aviation after the ACCC expressed concerns about the move's impact and launched an investigation.
Nufarm's shares surged more than 7% despite the company lowering its earnings outlook for the year. The agricultural chemicals company also said it plans to raise A$97 million through a share placement with its strategic Japanese partner, Sumitomo Chemical Co.
ECONOMIC NEWS: Australia AiG Manufacturing PMI Rebounds To Expansion In July --The latest survey from the Australian Industry Group (AIG) revealed that the manufacturing sector in Australia moved back into expansion territory in July, with a Performance of Manufacturing Index score of 51.3. That's up from 49.4 in June and it moves back above the boom-or-bust line of 50 that separates expansion from contraction.
CURRENCY NEWS: The Australian dollar declined against greenback on Thursday in reaction to comments from Federal Reserve Chairman Jerome Powell offsetting optimism about future interest rate cuts. The Australian dollar changed hands at $0.6852 after dropping from highs around $0.690 yesterday.
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