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The share market arrested a three-day slide as a rebound in the banks and gains in defensive sectors helped cushion a heavy fall in BHP.

The S&P/ASX 200 hit a two-week low in early action before trimming its loss to nine points or 0.12 per cent. At its weakest point, the index was down 40 points. Despite the partial recovery, the loss sealed the index’s longest losing run since mid-May.

Commonwealth Bank rose for the first time in five sessions. A strengthening US dollar lifted companies with significant US operations.

BHP, Woodside and CSL retreated after reporting full-year earnings. Domino’s Pizza, Fisher & Paykel Healthcare and Pro Medicus advanced.

What moved the market

Heavyweights BHP and CSL kept a lid on a tentative recovery as investors bought the biggest market dip in at least a month. At this morning’s low, the index had given up 158 points or 2.1 per cent in two and a bit sessions.

US stocks had ignored this week’s weakness on Asian markets until last night. The Dow and S&P 500 fell more than 0.7 per cent, breaking five-session win streaks.

“The spread of the highly contagious Delta variant appears to have set in caution among investors across global markets, exacerbating concerns that the world economy’s growth trajectory would lose momentum,” Kalkine Group CEO Kunal Sawhney said. “In some economies where the fears of Delta variant’s spread are co-existing with spiking inflation, additional concerns loom that stagflation could be in the offing.”

Weak US retail sales data exacerbated growth worries following evidence earlier in the week of a slowdown in Chinese factory output and sales.

“With Chinese data highlighting the detrimental impact of COVID-19 restrictions on the economic outlook, major exporting nations like Australia are anxious over the spillover effect of China slowdown. Fears loom that any sizeable decline in China’s economic activity can derail Australia’s economic growth via lower exports and investment,” Mr Sawhney said.  

Back home, an end to the NSW lockdown moved further away after state health authorities reported a record 633 new local cases in the 24 hours to 8 pm last night. Premier Gladys Berejiklian said numbers had yet to peak. The ACT reported 22 new cases, Victoria 24.

Bond proxies have been this week’s best performer as fading growth expectations depress yields. The yield on ten-year Australian government bonds eased this morning to its weakest since February before a partial recovery.

Winners’ circle

Domino’s Pizza rallied 7.13 per cent to a record on news full-year earnings increased 27.2 per cent. The fast food outfit boosted global sales by 14.6 per cent to $3.74 billion.

Pro Medicus was the session’s best performer, jumping 15.66 per cent to an all-time high after lifting full-year net profit by a third to $30.9 million. CEO Sam Hupert said the medical software company had a record year for new contracts.

The nation’s second largest healthcare company by market weighting, Fisher & Paykel, rose 3.59 per cent as revenues largely weathered a decline in demand for ventilators. Revenue over the four months to the end of July was $583 million, just two per cent lower than the same period last year when the first wave of Covid boosted demand.

Coles expects shopping behaviour to normalise next year as increased vaccination diminishes the need for lockdowns. Trading conditions remained volatile this quarter as lockdowns encouraged shoppers to buy local, avoiding shopping centres and CBD stores. The supermarket increased full-year net profit by 7.5 per cent to $1.005 billion. The share price finished near flat, ahead 0.05 per cent.

Packaging giant Amcor firmed 2.41 per cent to an all-time high after increasing adjusted full-year earnings per share 16 per cent and predicting further growth. The firm expects growth in adjusted EPS of 7-11 per cent and adjusted free cashflow of $1.1-$1.2 billion this financial year.

Winners among other companies reporting included Vicinity Centres +1.91 per cent, Southern Cross Media +5.18 per cent, EML Payments +2.26 per cent and EBOS Group +3.76 per cent. Nearmap closed unchanged.

Less well-received were earnings from Sims -5.84 per cent, Bapcor -4.82 per cent, OZ Minerals -0.41 per cent, Netwealth -4.81 per cent, McPherson’s -3.46 per cent and Super Retail Group -1.07 per cent.

The big four banks provided much of the session’s strength. Westpac rallied 1.41 per cent, ANZ 0.18 per cent, NAB 0.66 per cent and CBA 0.78 per cent.

Also strong were companies that generate much of their profits in US dollars. Transurban gained 2.07 per cent, Aristocrat Leisure 1.33 per cent, Brambles 1 per cent and Macquarie Group 0.56 per cent. The US dollar index firmed 0.5 per cent overnight.

Doghouse

BHP was the biggest drag on the index after announcing major changes in structure and direction. If approved by shareholders, the company intends to give up its dual-listing. BHP Ltd – the Australian operation – will acquire BHP Plc, the UK entity formerly known as Billiton. The unified company would have its primary listing on the ASX and smaller listings in the UK, South Africa and the US.

At the same time, the company announced it will exit the oil industry by merging its energy assets with Woodside Petroleum, and push into potash by investing in a Canadian project. A 42 per cent increase in revenue and profit were almost an after-thought in a blizzard of announcements. Investors will receive a final dividend of US$2 per share.

The share price tanked 7.07 per cent as investors digested the implications for its various listings. Overnight, the UK listing climbed 3.4 per cent.

Biotech CSL eased 1.47 per cent as a forecast contraction in profit this year overshadowed a strong FY21 result. The company declared a better-than-expected full year net profit of $2.375 billion, up 13 per cent on FY20. CEO Paul Perreault warned rising costs would impact margins this year.

“We see FY22 as a transitional year as we continue to invest and deliver against our long term strategy,” Mr Perreault said. “CSL’s net profit after tax for FY22 is anticipated to be in the range of approximately $2,150 million to $2,250 million at constant currency.”

Woodside Petroleum swung back to profit over the first half as LNG and oil prices recovered from the pandemic crash. Net profit was $317 million, versus a loss of $4.067 billion over the same period last year. The company boosted its interim dividend to 30 US cents per share. The share price eased 2.12 per cent as the market continued to adjust to the merger deal with BHP.

A record profit in its lotteries business and improvements at its TAB outlets helped Tabcorp raise group revenue 8.8 per cent. Shareholders will receive a final dividend of 14.5 cents per share, a 31.8 per cent increase on last year. The share price eased 0.82 per cent.

Away from earnings, Rio Tinto retreated 2.3 per cent, Newcrest 1.06 per cent, Afterpay 0.7 per cent and Wesfarmers 1.05 per cent

Other markets

Asian markets ignored overnight weakness on Wall Street. The Asia Dow rose 0.19 per cent, China’s Shanghai Composite 0.6 per cent, Hong Kong’s Hang Seng 0.72 per cent and Japan’s Nikkei 0.72 per cent.

US futures shrugged off early weakness. S&P 500 futures were recently ahead three points or 0.08 per cent.

Oil regained around half of last night’s loss. Brent crude rallied 22 US cents or 0.32 per cent to US$69.26 a barrel.

Gold reversed last night’s US$2 retreat, rising US$4 or 0.22 per cent to US$1,791.80 an ounce.

The dollar edged off a nine-month low. The Aussie rose 0.06 per cent to 72.59 US cents.

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