ASX drops 0.47pc as Fed analysis looms: Wednesday 17 March

Steven Deare
(Australian Associated Press)

 

Investors on the ASX removed some risk from their portfolios as the outcomes of the US Federal Reserve’s policy meeting on Thursday loomed large over financial markets.

The S&P/ASX200 benchmark index closed down 31.9 points, or 0.47 per cent, to 6795.2 on Wednesday.

The index reached a session low of 6761.4 shortly after 1230 AEDT.

The All Ordinaries dropped 31 points, or 0.44 per cent, to 7048.

The heavyweight materials sector fell 1.46 per cent, despite marginal improvement in iron ore prices.

IG Markets analyst Kyle Rodda said metals prices had been mixed of late following concern over demand in China.

The energy sector lost 1.19 per cent after oil prices fell for a third day.

More European nations suspended using the AstraZeneca coronavirus vaccine due to blood clots in some recipients. The move threatens recovery in fuel demand.

Australia’s medicines regulator said there were no problems in its approved vaccines.

The top sector was telecommunications, which gained one per cent.

US markets closed mostly lower as the investors looked forward to the results of the US central bank’s two-day meeting.

Fears about an overheating economy and a recent increase in bond yields have increased scrutiny on the Fed’s meeting.

GSFM investment strategy consultant Stephen Miller did not expect changes to policy, but was interested in the commentary.

“What will be interesting will be the commentary on the recent rise in bond yields,” he said.

“Which measures might they wish to use, were they concerned about the rise in yields,” he asked.

Mr Miller did not expect chairman Jerome Powell to be alarmed.

“I think they’ll have a glass half-full approach and say the rise in yields reflects confidence in an exit from the pandemic, with inflation higher,” he said.

In Australia, the Commonwealth Bank says it will offer its own buy now, pay later service to customers from mid-year.

Customers will be able to use debit and credit cards to access the service for purchases between $100 and $1000 and pay in four fortnightly instalments.

While providers such as Afterpay charge businesses about four per cent of a sale, the bank said businesses would pay no more than its standard fee (about one per cent).

Afterpay shares fell to a session low of $108.88 following the news, but closed up 1.15 per cent to $112.99.

The bank, and other members of the big four, were down less than one per cent.

New Zealand dairy co-operative Fonterra reported a first-half net loss of $NZ391 million and will sell its joint venture farms in China.

Boss Miles Hurrell said the company was also selling its own farms in China as part of focusing on New Zealand milk.

Shareholders will receive an interim dividend for the six months to January 31 of five NZ cents per share.

Fonterra shares were higher by 1.08 per cent to $4.70.

In mining, BHP shed 1.64 per cent to $46.07, Fortescue lost 0.58 per cent to $20.40 and Rio Tinto declined by 0.95 per cent to $111.79.

On Thursday, labour force figures for February are due. Economists predict good news on unemployment.

The jobless rate is forecast to ease to at least 6.3 per cent from 6.4 per cent in January, with the number of people employed rising by a further 30,000.

The Australian dollar was buying 77.34 US cents at 1721 AEDT, lower from 77.52 US cents at Tuesday’s close.

ON THE ASX

* The S&P/ASX200 benchmark index closed down 31.9 points, or 0.47 per cent, to 6795.2 on Wednesday.

* The All Ordinaries dropped 31 points, or 0.44 per cent, at 7048.

* At 1721 AEDT, the SPI200 futures index was up by 13 points, or 0.19 per cent, and trading at 6804 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 77.34 US cents, from 77.52 cents on Tuesday

* 84.40 Japanese yen, from 84.56 yen

* 64.98 Euro cents, from 64.94 cents

* 55.66 British pence, from 55.86 pence

* 107.70 NZ cents, from 107.66 cents.

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