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The share market fell into a correction, declining for a fourth session as global markets continued to adjust to the prospect of higher borrowing costs and the withdrawal of central bank stimulus.

The S&P/ASX 200 dipped below 6800 for the first time since early April. The Australian benchmark traded as low as 6758.2 before paring its loss to 123 points or 1.77 per cent at 6838.3.

Gold miners and tech stocks led the retreat. Energy and utility companies resisted the sell-off.

What moved the market

Today’s loss extended the index’s decline from its August peak to almost 10.4 per cent, meeting the definition of a technical correction. Much of the weakness has come over the last week. The index opened near 7400 just five sessions ago.

The sell-off comes as markets prepare for rates to lift off record lows and for central banks to lighten balance sheets bloated by emergency buying during the pandemic. What started in early January as weakness among rate-sensitive growth stocks swiftly expanded to encompass the entire market.

A wild week’s trading on Wall Street continued overnight following an unexpectedly hawkish outlook from the Federal Reserve. Financial markets had prepared for several rate increases this year, but were unsettled by indications the Fed may go higher, faster than market pricing indicated.

Fed Chair Jerome Powell said the committee was ready to raise in March and end its quantitative easing program. He refused to rule out rate increases each meeting this year.

“I think there’s quite a bit of room to raise interest rates without threatening the labour market,” he told reporters.

Bond markets sold off, sending yields higher. Equity markets shed previous gains. The S&P 500 went from a rise of 2.2 per cent to a loss of 0.15 per cent following the update.

US futures extended declines this afternoon. S&P futures dived 60 points or 1.4 per cent. Nasdaq futures slumped 1.6 per cent.

Japan’s Nikkei fell 3.19 per cent to a 14-month low. China’s Shanghai Composite gave up 0.88 per cent, Hong Kong’s Hang Seng 2.57 per cent and the Asia Dow 2.71 per cent.

The Australian volatility index climbed to a 14-month high. The S&P/ASX VIX broke above 20 for the first time since November 2020, a month when the initial pandemic ructions were still subsiding.

Winners’ circle

Energy companies chased gains in the price of crude. Brent crude cracked US$90 a barrel overnight for the first time since 2014. Beach Energy rose 8.81 per cent, Santos 3.57 per cent and Woodside 2.49 per cent.

Premier Investments overcame pandemic store closures to increase sales during the first half. The retail group expects sales for the half to improve around 0.5 per cent to $769 million. Online sales increased 27 per cent. The share price lifted 2.07 per cent.

BHP firmed 1.42 per cent after a UK court sanctioned the miner’s proposal to reunify its corporate structure back in Australia. Unification is now expected to complete by January 31. BHP Group will then become the sole parent company.

Rio Tinto gained 2.06 per cent off improved iron ore prices. Fortescue Metals eased 0.1 per cent.

Champion Iron will pay shareholders an inaugural dividend of 10 cents per share after reporting net income of $68 million for the quarter. The company reported record iron ore production. The miner’s shares added 2.46 per cent.

Genworth jumped 13.76 per cent after retaining its role as exclusive provider of lenders’ mortgage insurance to Commonwealth Bank. The new contract will run for three years from the expiry of the current contract at the end of the year.

Investment manager Insignia (formerly IOOF Holdings) gained 1.54 per cent after reporting a slowdown in net outflows. Rival Perpetual fell 0.61 per cent despite increasing assets under management by 1.8 per cent last quarter.

Doghouse

An unforgiving market punished any company that hinted at cost pressures or Covid-related supply-chain issues. OZ Minerals dropped 2.89 per cent despite meeting 2021 production and costs guidance. The diversified miner reported record calendar-year revenue of $2.1 billion but warned of persisting workforce and supply challenges.

Online retailer Kogan plunged 12.27 per cent to a 21-month low after first-half profit and earnings fell short of the market consensus. Gross profit declined 4 per cent year-on-year as the company struggled with supply chain interruptions. Gross sales rose 9 per cent year on year.

Gold miners struggled following a sharp retreat in precious metals as the US dollar rallied. Evolution Mining sagged 11.28 per cent despite reaffirming full-year production guidance. The miner produced 148,084 ounces of gold in the face of significant rainfall, labour shortages and Covid cases.

Silver Lake Resources said it was “well placed” to meet full-year guidance following a “solid” quarter, but saw its shares fall 11.04 per cent during a tough session for the sector. Westgold also fell after reporting, shedding 7.81 per cent.

Tech stocks saw heavy selling as investors continued to unload companies seen as vulnerable to higher borrowing costs. WiseTech fell 9.85 per cent, Xero 6.69 per cent and Megaport 9.46 per cent.

Block shed 5.35 per cent and Zip Co 9.66 per cent. Tuesday’s best performer, Codan, reversed10.22 per cent.

The heavyweight banks turned mixed with the sinking tide after briefly rallying on the prospect of a return to more typical profit margins as this era of record-low rates draws to an end. ANZ improved 1.12 per cent. Westpac faded 0.25 per cent, NAB 0.37 per cent and CBA 1.75 per cent. UK banking group Virgin Money firmed 2.95 per cent.

Other markets

Oil retreated after settling higher ahead of the Fed policy update. Brent crude faded 77 US cents or 0.87 per cent to US$87.97 a barrel.

Gold fell as the US dollar rallied. The yellow metal declined US$15.80 or 0.86 per cent to US$1,813.90 an ounce.

The dollar faded 0.59 per cent to 70.79 US cents.

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