• ASX fell 1pc, tracking moves in New York
  • Treasury Wine drops after saying it may sell part of the business
  • Fitch expected to downgrade US bonds

 

The ASX fell by 1% today after US and European stocks sold off heavily overnight amid uncertainties over the US debt ceiling crisis.

All ASX sectors were down today, with the exception of Tech, which rose almost 2%.

Tech stocks climbed on the back of data centre stock NextDC (ASX:NXT), which rose by 4%, and Xero (ASX:XRO), which rose 2% – both with no specific news.

Treasury Wine Estates (ASX:TWE) fell 5% after saying consumption outlook for commercial wine remains challenged due to higher living costs, most notably in Australia and the UK.

TWE said that it may pursue asset sales in the commercial wines business as part of a broader restructuring effort. This will impact labels such as 19 Crimes, Wolf Blass, Lindemans, Pepperjack, and Wynns.

Meanwhile, US lawmakers are trading barbs over the debt ceiling standoff, as the country lurches closer toward a potential default.

Republican house speaker McCarthy has cursed Biden for submitting to the “extreme” wing of his party. The White House estimated that a prolonged default could cause 8.3 million job losses in the US and a world-shaking recession.

 

Fitch to downgrade US?

Rating agency Fitch has warned the US could lose its AAA sovereign rating if the deadlock is not broken soon.

Fitch said it may downgrade US Treasury ratings and has moved the US to “rating watch negative” under its classification.

“.. this reflects the increased partisanship that is hindering a resolution despite the fast-approaching so-called X date,” Fitch said in a statement.

The X-date refers to the point at which Washington runs out of cash, which Treasury Secretary Yellen said could be as early as June 1.

Previously, S&P has downgraded the US from AAA after a similar brush with default in 2011.

Analysts say that if the US defaults, even just for a few hours, its creditworthiness would change, perhaps forever.

Moody’s chief economist Mark Zandi told CNN that “everyone is going to get hurt” if the nation defaults, adding it’s “just a matter of degree”.

 

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Adbri (ASX:ADB)

The cement maker rose over 13% after releasing a trading update at its AGM today. The company said it continued to see strong demand for Adbri’s products across key segments in Q1, consistent with last year. For FY22 full year, the company reported an underlying NPAT of $77.7m, a decrease of 31% from last year but in line with guidance.

Costa Group (ASX:CGC)

The horticulture company also rose 6% after providing its trading update at its AGM. Costa said China is an important growth engine for the company, and the Board has approved a plan for future footprint growth in the country.

In terms of the current outlook, Costa says it is seeing generally improved growing conditions and remains positive about the future, particularly the international segment which has been exceptional, and is expected to deliver a record financial result for the current year.

 

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Helia Group (ASX:HLI)

The mortgage insurance provider fell 4% after announcing that it has adopted the AASB 17 Insurance Contracts standard, which replaces AASB 1023 General Insurance Contracts (AASB 1023) for annual reporting periods from 2023 onwards.

Under AASB 17, there has been some revisions, including an opening balance sheet reduction in Net Assets of $215 million, which is at the bottom end of the previously advised range of $210 million to $270 million.

The FY22 Statutory NPAT under AASB 17 is now $201.2 million, compared to $186.8 million previously reported.

ASX Limited (ASX:ASX)

The market operator fell 1% after saying that it has signed a binding agreement to sell 100% of its interest in Yieldbroker to a wholly owned subsidiary of Tradeweb Markets for approximately $55m (after estimated transaction costs).

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