Australian shares are falling, tracking weakness in Europe after official reports confirmed Germany’s economic malaise, further winding back expectations about when the region’s central bank will begin cutting rates.
Near midday, the S&P/ASX 200 is down 88.6 points, or 1.2 per cent to 7422.4. The All Ordinaries fell by a similar margin.
All sectors are in the red, with utilities, energy and materials all down more than 1.5 per cent. Overnight, European gas futures fell to a five-month low amid high inventories and weak demand and despite continuing hostilities in the Red Sea, a key shipping route for the commodity.
Consumer staples are down 1.2 per cent, dragged by supermarket giants Coles and Woolworths. The fall comes after Australia’s competition regulator said it was considering suing a big supermarket chain for breaching consumer law. Woolworths is down 1.5 per cent to $35.65 and Coles is down 1.7 per cent to $15.51.
Germany skirts technical recession
Overnight, a preliminary estimate showed Germany’s economy shrank 0.3 per cent in the October-December. The September quarter was revised to unchanged from the preliminary reading of having decreased 0.1 per cent.
The “small upward revision” to the third quarter data means Germany narrowly avoided a technical recession in the second half of last year.
US markets were closed for the Martin Luther King jr national holiday.Trading will resume on Tuesday in New York.
Bunds fell in a decline that highlights a chasm between market expectations of European Central Bank rate cuts and a less optimistic outlook among economists. The market is pricing in around six cuts, while economists polled by Bloomberg see four 25 basis point reductions as a more realistic scenario.
ECB Governing Council member Robert Holzmann indicated cuts this year were not assured given lingering inflation and geopolitical risks, in Monday comments. The sentiments echo prior comments from ECB President Christine Lagarde in warning that it’s too early to talk about trimming borrowing costs.
Stocks in focus
Lovisa is the worst performing on the benchmark, down 6.2 per cent to $22.48, after it was cut to a neutral rating by analysts at UBS.
Core Lithium is 4.7 per cent lower at 20¢. Analysts at Goldman Sachs cut the price target for the embattled battery metals play to 15¢. Shares are down more than 80 per cent in the last 12 months.
Super Retail Group is down 4.2 per cent to $16.01 after jumping by a similar margin yesterday following a stronger-than-expected trading update.
Rio Tinto’s flagship iron ore division has delivered its best export volumes in five years, but the company’s fragile ceasefire with the Mongolian government appears to be on shaky ground after a new tax grab related to its giant copper mine. Shares are down 1.2 per cent to $126.76.
Investment platform HUB24 is 3.5 per cent lower at $35.44 after recording inflows of $4.5 billion in its December quarter.
With Bloomberg
