ASX 200 Falls Amid Mining Sell-Off; Financials Show Resilience

Image Source : Krish Capital Pty Ltd

Index Update: The Australian sharemarket closed slightly lower on Thursday, weighed down by a broad sell-off in mining stocks, with the sector down by 1.78%. The benchmark S&P/ASX 200 index slipped 7.50 points to finish at 8,523.70. Over the past five trading days, the index has declined 0.48% and remains 1.34% below its 52-week high. Sector performance was mixed, with seven of the 11 sectors finishing in the red. Financials bucked the trend, emerging as the best-performing sector with a gain of 0.92% on the day and up 0.15% over the week.

Macro Update: Australia's unemployment rate held steady at 4.1% in May, according to data released today by the Australian Bureau of Statistics (ABS). While employment fell by 2,000 people this month, jobs are still up 2.3% compared to May 2024, outpacing the pre-pandemic 10-year average annual growth of 1.7%. On the global front, the U.S. Federal Reserve held interest rates steady, projecting two rate cuts by end-2025. However, Chair Jerome Powell warned against overreliance on forecasts, citing "meaningful" inflation ahead. He noted rising consumer prices, driven in part by import tariffs proposed by the Trump administration, could complicate the path to lower borrowing costs.

Top Market Movers: The top three gainers on the ASX were Tabcorp Holdings Limited (ASX: TAH), closing at AUD 0.745 with a 2.76% gain, followed by IDP Education Limited (ASX: IEL) at AUD 3.760, up 2.45%, and Brambles Limited (ASX: BXB), closing at AUD 23.70 with a 2.16% increase. On the downside, Mesoblast Limited (ASX: MSB) closed at AUD 1.67, down 6.70%, Megaport Limited (ASX: MP1) at AUD 13.29, down 6.01%, and Generation Development Group Limited (ASX: GDG), closing at AUD 5.40, down 5.76%.

Commodity Update: The dollar held firm Thursday amid Fed Chair Powell’s cautious inflation stance and rising Middle East tensions, keeping market sentiment fragile. The Fed kept rates unchanged, signalling possible cuts later this year, though consensus was mixed. Gold slipped 0.42% to USD 3,393.75, silver fell 0.36%, and copper edged down 0.10%. Brent crude declined 0.48% to USD 76.33 as uncertainty over U.S. action in the Israel-Iran conflict weighed on investors.

Our Stance: The recent dip in the ASX 200, driven by a mining sector sell-off, reflects ongoing global uncertainties, including geopolitical tensions and cautious inflation outlooks. Despite the pullback, financials showing resilience is a positive sign, indicating some stability within the market. Australia’s steady unemployment rate of 4.1% and job growth compared to pre-pandemic levels provide a positive economic backdrop. However, with the Fed signaling possible rate cuts but warning of persistent inflation risks, investors should remain cautious. 

The S&P/ASX 200 Index faced a challenging trading session, slipping 7.50 points and forming a small bearish candlestick pattern. This setup reflects short-term bearish sentiment, highlighting growing caution among investors. Despite this pullback, the index remains positioned above its 21-period Simple Moving Average (SMA), which now acts as a critical dynamic support. On the daily chart, a key support level is identified near 8,477.14, a zone that will be crucial in helping the index consolidate recent gains and sustain investor confidence in its upward trajectory. Encouragingly, the index also holds above the 21-period SMA on the weekly chart, a positive technical signal that points to the potential for sustained longer-term momentum. The alignment of these technical indicators across multiple timeframes suggests that, while near-term challenges persist, the index could demonstrate resilience and continue its upward trend, provided it maintains these key support levels and broader market conditions remain constructive.