ASX slumps as AUD rises to 78 US cents

·4-min read

Australia's share market has pulled back from near-record heights, and the Aussie dollar climbed against the US after the Reserve Bank flagged winding up cheap credit for banks.

The benchmark S&P/ASX200 index closed down 47.8 points, or 0.68 per cent, to 7017.8.

The index on Monday had its best close since February 2020, and is 144 points from its record close.

The All Ordinaries on Tuesday closed lower by 45.9 points, or 0.63 per cent, to 7282.1 points.

The losses were the biggest for April and ended a run of five sessions of gains.

The indices' steady decline during the session contrasted with a consistent rise in the Aussie dollar. After the ASX closed, the dollar was buying more than 78 US cents.

Deep Data Analytics chief executive Mathan Somasundaram said worries about inflation from the pandemic recovery were hampering the US dollar.

Meanwhile, the Reserve Bank's minutes of its April meetings may also have motivated traders to buy the Aussie dollar.

The RBA said its term funding facility, which provides cheap credit to banks, still had $95 billion to be drawn down until the end of June.

The central bank said it would consider extending the facility if there was a deterioration in credit conditions, but there were no such signs.

While the RBA said it won't raise rates till 2024, Mr Somasundaram did not agree.

"We've probably seen the bottom of the interest rate cycle, and the RBA will be putting up rates sometime in the next year, even though it doesn't want to," he said.

In the US, markets closed lower. Investors waited for guidance from first-quarter earnings to justify high valuations, while Tesla shares fell after a fatal car crash.

On the ASX, most shares were down. Health and information technology lost more than one per cent.

Rio Tinto's iron ore production in Australia's Pilbara region has fallen after wet weather and labour shortages impacted output.

But the two per cent decline in the first quarter to 76.4 million tonnes, from the same period last year, won't impact the resources giant's optimistic full-year outlook.

Iron ore shipments in the March quarter rose seven per cent to 77.8 million tonnes.

Shares were down 0.54 per cent to $120.20.

BHP lost 0.23 per cent to $47.45, while Fortescue rose 1.89 per cent to $21.60.

Afterpay confirmed it is closer to listing on a US market after North America overtook Australia and New Zealand as the biggest region for sales.

The buy now, pay later provider published sales figures which showed people in Canada and the US spent $2.6 billion using the service in the three months to March 31.

The spending constituted a rise of 167 per cent on the same quarter last year.

Shares were down 0.77 per cent to $125.23.

Investment manager Challenger plunged 15.76 per cent to $5.56 after it said full-year profit was expected to be lower.

The company has been hit by movements in bond markets.

It forecast net profit before tax to be at the bottom part of a range of $390 million to $440 million.

In banking, the Commonwealth fared worst of the big four and lost 1.24 per cent to $87.74.

Coca-Cola Amatil gained court approval for its European peer's takeover.

Shares were up 0.08 per cent to $13.31.

On Wednesday, economic data will include job vacancies and retail spending for March.

BHP will give its third-quarter production update.

The Australian dollar was buying 78.08 US cents at 1725 AEST, higher from 77.42 US cents at Monday's close.

ON THE ASX

* The benchmark S&P/ASX200 index closed down 47.8 points, or 0.68 per cent, to 7017.8 on Tuesday.

* The All Ordinaries closed lower by 45.9 points, or 0.63 per cent, to 7282.1 points.

* At 1725 AEST, the SPI200 futures index was down three points, or 0.04 per cent, to 6994.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 78.08 US cents, from 77.42 cents on Monday

* 84.71 Japanese yen, from 84.01 yen

* 64.72 Euro cents, from 64.64 cents

* 55.80 British pence, from 55.93 pence

* 108.09 NZ cents, from 108.22 cents.