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The share market eked out back-to-back gains for the first time this month despite pressure on miners following confirmation the Chinese economy contracted sharply under lockdown.

The S&P/ASX 200 slashed a 74-point opening surge to 18 points or 0.25 per cent by the close.

Gains in tech, banking and consumer stocks kept the index in positive territory. The major miners rolled over following weak Chinese factory and retail sales data. Brambles and Infomedia surged on takeover interest from private equity.

What moved the market

A second day of recovery hit a road bump when late-morning data confirmed the toll Beijing’s pursuit of zero Covid was taking on the Chinese economy. Industrial output unexpectedly contracted 2.9 per cent last month. Retail sales shrank 11.1 per cent, twice the median projection among economists.

Youth unemployment rose to a record. The overall jobless rate jumped to a two-year high of 6.1 per cent from 5.8 per cent in March.

The report sent tremors through financial markets. Everything from US equity futures to crude oil, the Australian dollar and Chinese shares turned lower. BHP sank 1.16 per cent, Rio Tinto shed 1.13 per cent and Fortescue Metals lost 2.22 per cent. China is a major consumer of Australian raw materials.

The dollar declined 0.9 per cent to 68.85 US cents.

“The zero-Covid policy has served to sharply slow the Chinese economy,” CommSec chief economist Craig James said.

“Somewhat perversely, the latest dreadful results for the economy could further prompt authorities to ease Covid-driven mobility restrictions and stimulate economic activity.”

The late-morning news hampered an initially buoyant start to the week following an end-of-week relief rally on Wall Street. The S&P 500 bounced 2.39 per cent on Friday. The Nasdaq Composite soared 3.82 per cent, its biggest advance since 2020.

US futures reversed course after the Chinese economic update. S&P 500 futures dived 19 points or almost 0.5 per cent.

Winners’ circle

Value investors wondering when it was time to re-enter the market were encouraged by an approach for Brambles from Luxembourg-based CVC Capital Partners. The Australian pallets business said it had held “preliminary, incomplete” discussions with CVC regarding an unsolicited proposal to acquire the company. No formal proposal had been received yet.

The company said “there is no certainty that the engagement will lead to a binding proposal being received from CVC”. The share price jumped 11.22 per cent.

Automotive parts and service software provider Infomedia jumped 28.52 per cent on a takeover offer from private-equity firm TA Associates Management. The US firm offered $1.70 per share, a 32.8 per cent premium to Infomedia’s share price on May 12. Infomedia stoked hopes of a bidding war by declaring it was in preliminary discussions with “other interested parties”.

“The Board intends to consider the Indicative Proposal from TA, alongside the expressions of interest, in an orderly manner and in the best interests of all Infomedia shareholders,” the board said. Credit Suisse will advise.

The tech sector extended its recovery from last week’s two-year low. The sector rose 2.1 per cent in the wake of Friday’s Nasdaq outperformance.

Xero jumped 4.42 per cent, Appen 3.9 per cent and Block 3.79 per cent. Life360 added 3.42 per cent, Novonix 3.26 per cent and Nextdc 2.79 per cent.

Rate-sensitive consumer stocks also recovered. The sector has been under pressure amid questions about the outlook for consumer spending as rising rates reduce spending power.

Domino’s Pizza delivered a rise of 3.45 per cent. Corporate Travel Management gained 3.35 per cent, Carsales.com 3.18 per cent and Webjet 3.11 per cent.

A production upgrade boosted Cooper Energy 5.66 per cent. The gas producer narrowed its full-year production forecast to the upper range of previous guidance.

Doghouse

Healthcare heavyweight CSL retreated 1.05 per cent from Friday’s four-month high. Macquarie Group‘s shares fell 1.88 per cent as they traded without the right to the bank’s latest dividend.

Industrial property giant Goodman faded 0.61 per cent after reaffirming full-year guidance. The company expects full-year operating earnings per share growth of 23 per cent and a full-year distribution of 30 cents per share.

Weak US sales prompted performance management software provider Integrated Research to downgrade its full-year profit forecast. The firm said it now expected net profit to be below last year. The share price slumped 14.71 per cent to a ten-year low

An earnings downgrade tore the bottom out of shares in underwear retailer Step One Clothing. The share price plummeted 56.25 per cent to an all-time low after the firm halved its full-year earnings outlook to $7-$8.5 million from previous guidance of $15 million.  

Other markets

Asian markets steadied in afternoon trade. The Asia Dow tacked on 0.09 per cent. Hong Kong’s Hang Seng gained 0.46 per cent. Japan’s Nikkei extended its advance to 0.54 per cent. China’s Shanghai Composite lost 0.23 per cent.

Oil retreated with other risk assets. Brent crude declined US$2.02 or 1.8 per cent to US$109.53 a barrel.

Gold faded US$1.40 or 0.08 per cent to US$1,806.80 an ounce.

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