Softer resources drag down ASX 200 for the week

Softer resources drag down ASX 200 for the week

Falling gold stocks and selling in BHP (ASX: BHP) caused the Australian share market to soften on Friday, pushing the ASX 200 down by 44 points, or 0.5%, to 8796.70 points.

That led to a 0.1% market fall for the week which was not as bad as it could have been given the renewed fighting in the Middle East and Iran which weighed down risk assets while higher oil prices led to new inflation concerns and fears of higher interest rates.

Four of the 11 sectors weakened, with gold falling below $US4000 as speculation grew that the conflict could force the US Federal Reserve to raise rates to contain inflation, as oil prices rallied significantly.

Materials hit hard

The materials sector was the hardest hit, down almost 3%, as BHP shares fell 2.7% to $57.54 due to a range of factors, including strike action at Port Hedland, weaker copper production guidance, and analyst concerns that valuations were too lofty. Shares in Pilbara neighbour Rio Tinto (ASX: RIO) were also weaker, down 2.4% to $160.95.

Gold keeps slipping

Gold mining shares were sharply lower, with Northern Star shares (ASX: NST) down 4.1% to $19.24, Genesis Minerals shares (ASX: GMD) down 7.2% to $5.56, and Newmont shares (ASX: NEM) down 3.6% to $129.91. Weaker-than-expected fiscal year guidance from Regis Resources (ASX: RRL) saw its shares crater 8.4% to $5.64.

Not even the banking sector could rescue the market, with three of the big four lower. Commonwealth Bank shares (ASX: CBA) dropped 0.8% to $171.78, ANZ shares (ASX: ANZ) fell 0.4% to $36.06 and Westpac shares (ASX: WBC) fell 0.2% to $36.56. Shares in National Australia Bank (ASX: NAB) went against the consensus, rising 0.2% to $39.85.

Tech stocks struggle

Tech stocks really struggled after the AI sell-down on Wall Street, with shares in AI data centre operator NextDC (ASX: NXT) down 2.5% while shares in family tracking app Life360 (ASX: 360) fell 3.4%. Shares in network provider Megaport (ASX: MP1) slumped 8.5% but the accounting software giant Xero (ASX: XRO) went against the grain with a rise of 0.9%. There were some relief rallies, particularly in consumer staples, with shares in Coles (ASX: COL) up 2.9% to $23.21 after announcing it had ended discussions with TPG Capital over a potential $4 billion acquisition of pet wellness company Greencross.

Coles shares have shed around 9% since the July 1 announcement of the takeover so investors were relieved that the risk of a potentially value destroying acquisition has passed for now.

Oil shares firmer

Investors were also attracted back to oil stocks by the higher oil prices, with shares in Woodside Energy (ASX: WDS) up 3.3% to $30.46, while Ampol shares (ASX: ALD) rose by 1.7% to $37.55. In company news, Zip shares (ASX: ZIP) fell 5.1 per cent to $2.98 after it said it would exit New Zealand after deciding the market no longer fits its strategic priorities, as the buy now, pay later provider focuses on Australia and the US. 4D Medical shares (ASX: 4DX) plunged 15.6% to $3.20 as investors weighed the impact of the US congress introducing a bill that would direct the US Department of Veterans Affairs to establish a pilot program using 4D functional lung imaging software to identify respiratory disorders and lung disease among veterans.

The week ahead

After the big US banks reported in the past week, the coming week will see the turn of the big technology stocks on which many of the lofty earnings upgrades rest heavily.

S&P 500 earnings per share (EPS) is expected to grow by 23.6% in the second quarter, with a massive rise in semiconductor EPS responsible for much of the increase.

Semiconductor stocks are predicted to grow profits by 131% year on year (YoY) as two of the members of the 'Magnificent Seven' – Alphabet and Tesla – will release their results.

Alphabet is forecast to grow net income by 26% YoY, and there are strong expectations of a short-term turnaround for Tesla.

Lots of US companies reporting

A slew of other US companies will report too, including General Motors, 3M, MSCI, Danaher, Halliburton, IBM, Moody's, CME Group, Texas Instruments, ServiceNow, GE, Intel, Newmont, Blackstone, Lockheed Martin, Freeport-McMoRan, Nasdaq, ExxonMobil, American Express, NextEra Energy, and Verizon.

In Australia, the key labour force data for June is out on Thursday.

Resource updates on the ASX

There is a forest of quarterly updates in the coming week from ASX-listed resources companies, including South32, Yancoal, Aurelia Metals, HUB24, Alkane Resources, Beach Energy, Lynas Rare Earths, Westgold, Karoon Energy, Santos, Sandfire Resources, and Regis Resources, with Newmont reporting earnings on Friday.

There are also two interest rate decisions to be announced by the Chinese and European central banks on Monday, with both tipped to keep official rates steady.