Technology stocks surge as miners drag ASX 0.5pc lower

“Most of that is being driven on the shifting narrative from inflation risk to recession risk, that the Fed will have to smack the US economy pretty hard with tightening monetary policy, and the US will slip into recession. Tech stocks are growth stocks, so the rally today is very much a valuation play on lower bond yields.”

At the close of trading, the benchmark S&P/ASX 200 index had dropped 0.5 per cent, or 34.8 points, to 6594.5; the All Ords dipped by the same margin to 6784.3.


Mr Rundell said bond yields had gotten ahead of themselves, pricing in an “Armageddon scenario or inflation through the roof”.

Overnight, traders were spooked as the US 10-year and two-year bond yields inverted again overnight, flashing a recession alert. That meant short-term rates briefly exceeded long-term rates, indicating a growth shock ahead.

Australian 10-year treasuries yielded 3.39 per cent at the closing bell and have tumbled over the past fortnight. US 10-years offered 2.8 per cent.

Despite gains across most sectors of the market, led also by REITs, the S&P/ASX 200 ended a wild day in the red, pulled lower by declines of the mining giants BHP and Woodside. Gold miners also fell amid a retreat in commodity and iron ore prices.

The energy sector sank 5.8 per cent and the materials sector fell 5 per cent. BHP dropped 5.6 per cent to $37.76, South32 declined 8.3 per cent to $3.50 and Rio Tinto dropped 7.4 per cent to $93.37. Newcrest Mining decreased 6.6 per cent on the day to $19.60, Woodside Energy dropped 6.9 per cent to $30.20, and Santos fell 6.2 per cent to $7.


Share prices for Fortescue and Rio Tinto now sit at six-month lows as iron ore prices decline. Iron ore futures traded on the Singapore exchange for delivery in July were down 3.7 per cent to $US109.25 on Wednesday afternoon, with the August contract down 4.4 per cent to $US107.60.

The 10 biggest decliners in the benchmark S&P/ASX 200 were all from the materials sector, led by gold producer St Barbara, which fell 9.5 per cent.

Mr Rundell put the declines down to big falls in oil and commodity prices with recession anxiety hobbling demand for raw materials.

Oil posted its worst trading day in almost three months, outweighing the tight supply market. West Texas Intermediate crude futures settled below $US100 a barrel on Tuesday after falling more than 8 per cent, the most since March 9.

Gold, oil, iron ore and copper all traded lower over the day.


“If you are looking at recessionary conditions, if you are looking at falling demand, despite the constrained supply conditions prices will come off and that is reflected within company revenues,” Mr Rundell said.

“Growth concerns are filtering through to commodities and resources in general.”

The big banks traded slightly higher as investors bet the latest round of interest rate rises would help restore bank margins and after Commonwealth Bank of Australia became the first big bank to pass on rate increases.

ANZ and National Australia Bank followed closely behind, raising standard variable rates the full 0.5 of a percentage point, and lifting certain deposit rates by the same amount.

CBA rose 0.8 per cent to $92, while ANZ firmed 0.9 per cent, and NAB gained 1.8 per cent.

Mr Rundell notes that variable interest rate increases should have a significant impact on inflation and keep the cash rate “structurally lower longer-term” with Australians among the “most leveraged households in the world”.

“What it means is that when you do have a rate hike, it has a greater and more impact on household spending and the economy,” he said, comparing the Australian residential borrowing market with the US market, where most homeowners have fixed-rate mortgages.

Elsewhere, broker UBS lifted its rating on Woolworths to neutral from sell, and lifted its earnings per shares estimates for financial 2022 by 11 per cent and by 9 per cent for fiscal year 2023. It said the upgrade was based on improved EBIT margin and sales estimates as it passes on the rising cost of foodstuffs.

EML Payments has signed a deal with Spain’s national post office to load about 500,000 prepaid cards with €400 ($603) each. EML’s shares traded 14 per cent firmer at $6.26.

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