Mr Bundy said the signals from the fixed income market, when taken together with Australia’s softening housing market, were weighing on the prospects for corporate profit growth, and in turn, the equity market.
By sector, consumer discretionary firms, banks and energy companies declined, but gains for miners, real estate companies and industrials lifted the benchmark to its small overall gain.
“The continuing fall in bond yields is not necessarily inconsistent with rising sharemarkets,” AMP Capital’s Shane Oliver said. “US and global recession still looks to be a fair way off and we continue to see this being a reasonably good year for shares.”
On an individual stock level, Challenger surged 9.1 per cent to $7.94 after the financial group expanded its deal with Japanese insurance company MS&AD Insurance.
Transurban ended at a record high, with the group’s shares climbing 1.5 per cent to end the day at $13.08. BHP was another strong performer, with the miner advancing 1.1 per cent to $37.55.
Coles Group climbed 2.2 per cent $11.96 after the supermarket giant entered into an exclusive services agreement with Ocado Group to create an automated fulfilment and home-delivery solution to Australia by the 2023 financial year.
Coles was demerged from Wesfarmers in November. The conglomerate on Tuesday surprised the market with a $1.5 billion conditional offer for Lynas. The rare earths miner soared 35.1 per cent $2.10 while Wesfarmers dropped 3.5 per cent to $33.80.
Kathmandu fell 8.9 per cent to $2.13 after revealing that its first-half net profit rose 13.7 per cent to $NZ13.9 million as higher profits from recently acquired footwear brand Oboz offset weaker sales in New Zealand.
Westpac shares slipped 0.6 per cent to $25.97, adding to a 1.5 per cent loss made on Monday when the banking group told investors it would take a $260 million provision for customer remediation. The charge was set to lower first-half earnings by around 6 per cent, Morgan Stanley’s Richard E. Wiles noted. It was $70 million more than expected, he said, while cutting his first-half 2019 profit estimate by about 2 per cent. “Our earnings forecasts for 2019 are already 5 per cent below consensus,” Mr Wiles noted. “We currently forecast further provisions of $175 million post-tax in the second half of 2019 and approximately $175 million in fiscal year 2020, but see risk that remediation could be higher and drag on for longer than expected.”
New Zealand produced a trade surplus of $NZ12 million in February, from a deficit of $NZ948 million in January. “The headline data are in original terms and highly seasonal, with exports up 11 per cent month on month and imports down 9 per cent,” JP Morgan’s economics team said. “The seasonally adjusted numbers show that exports had the bigger fundamental improvement, up 8 per cent month on month with solid gains in the major agricultural groups dairy, meat and logs/wood.” The economists noted that the annual trade balance deteriorated to $NZ6.6 billion, the deepest deficit since 2006.
The Australian dollar traded up 0.2 per cent at US71.24¢ against the US dollar. Commonwealth Bank strategists said the currency had drawn support from a weaker US dollar and strength in commodity prices but in their view the risk of an interest rate cut from the Reserve Bank of Australia would weigh on the currency. While they noted that the RBA had previously signalled a small negative wealth effect from falling house prices, they said: “The longer the housing downturn goes on for, the more likely that falling house prices will weigh on consumption.”
A major German business survey, the Ifo business climate index, unexpectedly advanced to 99.6 in March, from an upwardly revised 98.7 reading in February. Capital Economics had been expecting a reading of 98.5 points, as had most economists. Both the current conditions and the business expectations components of the survey improved during the month, the economists noted. “This comes as a relief after the Markit Manufacturing PMI, released on Friday, fell to its lowest level in 6½ years,” the economists said.
Gold has been on a winning streak but struggled to extend those gains on Tuesday, with the precious metal slipping $US1.83, or 0.1 per cent, to $US1319.98 an ounce. Credit Suisse noted that the gold price had been boosted by a weaker US dollar and mounting concern over the prospects of the global economy. Those worries had had the effect of “brightening the metal’s appeal as a haven asset”, the strategists noted. Gold hit a three-week high on Monday and rose about 1 per cent last week for its third straight week of gains.
Sarah Turner writes on markets and is based in our Sydney newsroom.