Australian shares slip lower over the week
Australian shares ended the week slightly lower after recovering from heavy midweek selling which centred around resources stocks.
The S&P/ASX 200 index ended 11.4 points, or 0.2%, lower at 5,268.2, despite a gain of 38.2 points, or 0.7%, on Friday.
Buyers emerged on Thursday and Friday, encouraged by low US inflation numbers, according to CommSec analyst Tom Piotrowski.
“The markets celebrated the prospect of US interest rates remaining lower for longer,” Piotrowski said, adding, however, that the negligible inflation was fundamentally negative because it suggested a stagnant economy.
“It would be good if the case could be made for higher US rates,” he said.
Any signs of weakness in the US economy, including below-target inflation, adds weight to the argument that the US Federal Reserve could leave interest rates at close to 0 for even longer.
An interest rate rise would signal confidence that the economy is strong enough to withstand high borrowing costs for consumers and businesses.
Energy stocks were among the poorest performers over the week, with the sector down 5.7%, following robust gains a week earlier.
“Energy and mining stocks were the stretching point for the market this week,” Piotrowski said.
Oil prices appeared to have stabilised over the past few weeks at around US$50 but dropped below that level, sparking fresh selling.
“There’s a global oversupply of oil so you have to wonder about the durability of any gains in the oil price,” he said.
Energy sector heavyweight Woodside Petroleum (ASX: WPL) slid nearly 6% over the week as its quarterly production numbers showed lower revenue as a result of oil price declines.
The resources index fell 2.7% over the week after last week’s strong showing.
Shares in Rio Tinto (ASX: RIO) were 2.8% lower over the week at $53.69, including a drop of 1% on Friday despite a 17% jump in the diversified miner’s iron ore shipments over the September quarter.
Gold posted hefty gains as the prospect of low US rates and a low US dollar made producers of the US-dollar-denominated commodity attractive to investors in Australia, Piotrowski said.
The gold sector index climbed 8% over the week as Newcrest Mining (ASX: NCM) advanced 6.4% to $15.38 after gaining 14% a week earlier.
Santa Barbara (ASX: SBM) added 7.2% over the week to $1.34, despite falling 5.7% on Friday.
Northern Star Resources (ASX: NST) was 7% ahead over the week at $3.09, despite shedding 1.9% on Friday.
Elsewhere, blood products maker CSL (ASX: CSL) was 2.2% lower over the week at $89.30 despite announcing a $1bn buyback.
Asciano (ASX: AIO) slid 11.3% over the week to $7.60, including a 3.6% decline on Friday after Australia’s competition regulator expressed concern over Brookfield’s takeover offer for the company.