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Australian shares closed at a four-week low as rising energy prices and interest rates kept financial markets on edge.

The S&P/ASX 200 fell 101 points or 1.42 per cent to its third loss in four sessions.

Ten of eleven sectors declined. The heavyweight financial sector sank almost 3 per cent to its weakest level since March 2021 before a partial recovery. A three-month high in Brent crude lifted energy producers.

What moved the market

The ASX 200 logged its weakest finish since May 13 as the heavily-weighted banks declined for the third time since Tuesday’s rate rise. ANZ fell to a 15-month low. Shares in Bank of Queensland finished below $7 for the first time since November 2020.

The mood on global markets continued to darken as elevated energy prices threatened to derail hopes global inflation peaked in March. Brent crude tested US$124 a barrel this morning. The international benchmark was lately up 20 US cents or 0.16 per cent at US$123.78 after trading as high as US$124.34 a barrel.

“As long as commodity prices remain elevated, it’s going to be more difficult to see headline inflation come down,” Brian Levitt, global market strategist at Invesco, said.

US stocks fell overnight amid signs the economy was slowing. The S&P 500 shed 1.05 per cent. US and European equity futures drifted lower this afternoon.

“Stock futures in the Eurozone and in the US continue to trade on the downside, and investors and traders are picking up the momentum where they left off yesterday. In terms of their concerns, the very same issues, such as slower economic growth and higher inflation, are weighing their decision when it comes to back riskier assets,” Naeem Aslam, chief market analyst at broker AVATrade, said.

S&P 500 futures declined seven points or 0.17 per cent. European futures pointed to falls of 0.5 per cent and upwards ahead of tonight’s European Central Bank meeting.

CBA today cut its Australian growth outlook to reflect the impact of higher rates and cost-of-living pressures. The bank lowered its annual growth target to 3.5 per cent from a previous forecast of 4.7 per cent.

The World Bank and Organisation for Economic Co-operation and Development (OECD) downgraded their global growth forecasts. The OECD slashed its growth prediction to 3 per cent from 4.5 per cent and doubled its inflation forecast to almost 9 per cent. The World Bank cut its growth outlook to 2.9 per cent from 4.1 per cent and warned of looming recession in many countries.  

“The war in Ukraine, lockdowns in China, supply chain disruptions and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank president David Malpass said.

Winners’ circle

Energy was the only sector to offer a return after the international crude benchmark joined West Texas Intermediate at a three-month high.

“Brent oil is up for the eight days in the past 10 and now trades just above $124, up $10 in the past fortnight. After some indication of a likely ease in inflationary pressures, the renewed uptick in oil and energy prices is stoking concerns central banks will be forced to increase their hawkishness,” NAB currency strategist Rodrigo Catril said.

Woodside Energy climbed 1.87 per cent to a pandemic-era high. Beach Energy firmed 0.8 per cent. Santos dipped 1.14 per cent.

Other heavyweights to resist the downtrend were Aristocrat Leisure +0.96 per cent, CSL +0.29 per cent and Woolworths +0.12 per cent.

Crown Resorts rallied 1.96 per cent after gaming regulators in NSW and Victoria greenlit a takeover by US investment powerhouse Blackstone. Western Australia has yet to rule.

A return date for star stock picker Hamish Douglass lifted struggling fund manager Magellan 2.15 per cent. Douglass will resume as a consultant on October 1 after a period of medical leave. New CEO David George will join three weeks early on July 19.

Doghouse

Lenders fell for a third day. The nation’s largest bank, CBA, skidded 2.59 per cent to a level last seen in March. Westpac sank 3.69 per cent, NAB 2.28 per cent and ANZ 2.26 per cent. Mortgage insurer Genworth tumbled 8.25 per cent. Bank of Queensland dropped 1.84 per cent.

Aside from the banks, the heaviest drags were BHP -2.39 per cent, property giant Goodman -1.65 per cent and gold miner Newcrest -2.1 per cent.  

The index’s worst performers were Lifestyle Communities -7.66 per cent, Appen -7.09 per cent and Clinuvel Pharmaceuticals -6.81 per cent.

Syrah Resources sank 10.1 per cent after attacks by insurgents on other operations in Mozambique prompted the graphite miner to suspend personnel and logistics movements along a link road to its Balama mine. Mining and processing were unaffected.

Aurizon retreated 0.48 per cent from an 18-month high after the competition regulator raised concerns about a proposed acquisition of rival rail freight operator One Rail.

“By reducing the number of competitors in the supply of coal haulage in New South Wales and Queensland from three to two and removing an important competitor to Pacific National and Aurizon, we have preliminary concerns that the proposed acquisition of One Rail by Aurizon would be likely to substantially lessen competition,” ACCC Chair Gina Cass-Gottlieb said.

Cleanaway fell 1.73 per cent to a three-month low after fire broke out at a medical waste processing site. Damage to the facility in Dandenong, Victoria, was expected to reduce earnings from the waste manager’s Victorian Health Services business unit by $2 – $3 million per month.

An earnings upgrade offered Johns Lyng Group a quick lift before selling resumed. Shares in the building services provider faded to a loss of 5.47 per cent. The firm raised its full-year revenue forecast by 8 per cent to $867 million and its earnings outlook by 5.4 per cent million to $83 million.

Other markets

A broadly downbeat Asian session saw the Asia Dow fall 0.53 per cent. China’s Shanghai Composite shed 1.06 per cent. Hong Kong’s Hang Seng dipped 0.85 per cent. Japan’s Nikkei resisted the trend, rising 0.14 per cent.

Gold pared two days of gains, easing US$1.90 or 0.1 per cent to US$1,854.60 an ounce.

The dollar continued to lose altitude, falling 0.2 per cent to 71.71 US cents.

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