The laggards

Mining (down 2.2 per cent) was the weakest sector as heavyweights BHP (down 2.9 per cent), Fortescue (down 1.1 per cent) and Rio Tinto (down 2 per cent) all fell, with prices for metals like copper, gold and iron ore coming off recent highs.

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Shares in BHP slumped after Anglo American rejected its latest takeover offer and gave the miner a week to come up with an improved fourth bid.

Meanwhile, a group of 3000 residents of Papua New Guinea filed a class action against Rio Tinto over its Bougainville mine, which was shut down in 1989. The residents claim the mining practices resulted in environmental damage and social harm to locals.

Paladin Energy (down 5 per cent), Evolution Mining (down 4.3 per cent), Newmont (down 3.8 per cent) and Northern Star Resources (down 3.3 per cent) recorded the greatest losses among mega-cap stocks.

The lowdown

Tribeca Investment Partners lead portfolio manager Jun Bei Liu predicts that over the coming months, the sharemarket will be caught up in a tug-of-war between solid cyclical tailwinds as economic growth remains resilient, and rising headwinds from sticky inflation.

“We don’t think this is a particularly bad backdrop as long as the economy and in particular the labour market hold firm, but it may take a few months before the stars align once again and the market can look through near-term uncertainty,” she said.

“While the equity market has priced in a lot of incrementally positive news, we think a period of consolidation rather than a prolonged sell-off is most likely. We believe that there remains a strong desire to buy the dips, and this will help put a floor in the market should near-term concerns rise.”

Meanwhile, Judo Bank Flash Australia Composite PMI fell to a three-month low of 52.6 points in May, down from 53 in April. But the bank’s chief economic adviser Warren Hogan said the figures remained “firmly in expansionary territory”, indicating rising business activity across the country.

“These results highlight that the RBA could be forced into further interest rate increases this year. Business activity is improving in 2024, while price pressures remain elevated,” Hogan said.

“Tax cuts and cost-of-living relief could boost consumer spending over the second half of the year. The economy appears to be wandering off the RBA’s ‘narrow path’ with a recovery in economic activity and stubbornly high inflation.”

Overnight on Wall Street, the S&P 500 fell 0.3 per cent a day after setting its latest all-time high. The Dow Jones sank 0.5 per cent and the Nasdaq Composite slipped by 0.2 per cent.

Indexes had been close to flat early in the day, but they slunk lower after the Federal Reserve released the minutes of its last policy meeting. Discouragingly for markets, the minutes showed Fed officials suggesting it “would likely take longer than previously thought” to get inflation fully under control following disappointingly high readings at the start of the year.

And even though Fed chair Jerome Powell said after that meeting that the Fed is more likely to cut rates than to hike them, the minutes said “various participants” were willing to raise rates if inflation worsens. That hit the hopes on Wall Street that the Fed will be able to cut its main interest rate at least once this year.

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Quote of the day

“(What) we’re not doing is channelling my erudite, eloquent fellow Australians AC/DC: it wasn’t Dirty Deals Done Dirt Cheap,” said News Corp CEO Robert Thomson in a free interpretation of the band’s song title as he explained the media conglomerate’s deal with artificial intelligence giant OpenAI in a Fox News interview.

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With AP, Bloomberg