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Shares declined for a second day as a flat profit result from ANZ and a warning of “challenging trading conditions” cast a long shadow over the financial sector.

The ASX 200 retreated 28 points or 0.4 per cent to 6662 as the big four banks hit multi-week lows.

ANZ slumped 3.4 per cent to its weakest level since early September after Chief Executive Officer Shayne Elliott said the bank expected “challenging trading conditions to continue for the foreseeable future”. Record low interest rates, competition and global trade tensions would impact profitability. The bank reported a $6.47 billion full-year cash profit, in line with last year’s result. While the final dividend was held at 80 cents, franking credits were cut to 70 per cent from 100 per cent.

Investors took the news as a harbinger of tougher times ahead for the banking majors. CBA eased 1.2 per cent to a three-week low, NAB 1.3 per cent and Westpac 1.6 percent to a level last seen at the start of September.

The decline in the heavyweight financial sector outweighed gains in other sectors after Wall Street was boosted by a rate cut overnight. The S&P 500 rose 10 points or 0.33 per cent to a record close after the Federal Reserve lowered the federal funds rate by 25 basis points for the third time this year.

The local market extended its losses after Chinese economic data came in weaker than expected. Factory activity contracted to its slowest pace since February, according to the official manufacturing purchasing managers’ index. The PMI fell from 49.8 to 49.3, well short of expectations for an increase to 49.9. The services PMI also deteriorated, but at 52.3 was well above the 50-point level that indicates continued expansion.

Mining majors BHP and Rio Tinto lost ground, falling 1.1 per cent and 0.5 per cent, respectively. Other mining stocks fared better. Manganese miner Jupiter Mines rose 4.6 per cent after announcing it will pay out in dividends 90 per cent of cash received from its South African mine. Lithium producer Pilbara Mining added 5 per cent.

Gold miners were lifted by a rebound in the precious metal. St Barbara put on 3.3 per cent, Gold Road Resources 2.3 per cent and Regis Resources 2 per cent. Gold improved $6 or 0.4 per cent overnight and was lately steady at $US1,496.40 an ounce.

Traditional defensives fared well. AGL gained 1.8 per cent, Spark New Zealand 1.5 per cent, Domino Pizza 1.5 per cent and Woolworths 0.5 per cent. Water quality manager Phoslock Environmental Technologies added 7.4 per cent after reaffirming earnings and profit guidance.

What’s hot today and what’s not:

Hot today: mineral sands miner Iluka touched its highest point in almost three months after the company reported a 17 per cent increase in production last quarter. Year-to-date revenue rose 22 per cent to $1,666 per tonne and helped the company reduce its net debt from $142 million at the end of June to $89 million. Shares were lately up 5.2 per cent.

Not today: infant formula maker Bubs Australia has been one of the year’s star performers, rising from below 40 cents in December to a high of $1.61 in May. Shares slipped to a four-month low this morning after the China-focused company reported a 23 per cent decline in September-quarter revenue from the three months preceding. CEO Kristy Carr insisted the company remained well placed to grow its Chinese business. The share price was lately down 5.5 per cent at $1.12.

Asian markets followed Wall Street higher. China’s Shanghai Composite tacked on 0.1 per cent, Hong Kong’s Hang Seng 0.7 per cent and Japan’s Nikkei 0.3 per cent. S&P 500 index futures were flat.

Turning to commodity markets, Brent crude futures bounced 19 cents or 0.3 per cent this morning to $US60.80 a barrel.

On currency markets, the dollar extended overnight gains, lately rising another quarter of a cent to 69.2 US cents.

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