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The share market faded to a fifth straight loss at the end of its worst week since January as a collapse in commodity prices pulled the materials sector down almost 10 per cent.    

The S&P/ASX 200 dipped four points or 0.05 per cent. Gains in defensive sectors and Fortescue Metals helped offset falls in BHP and most of the banks.

Inghams, Cleanaway and Adairs advanced after reporting earnings. Cochlear, Stockland and St Barbara declined.

What moved the market

A week dominated by worries about global growth and the outlook for US stimulus ended with another tick lower. The ASX 200 edged up as much as 47 points in early action, then faded.

Today’s fall extended the index’s loss for the week to 168 points or 2.2 per cent, the largest since a 193-point dive in January. The materials sector, which accounts for almost a fifth of the index by market weighting, slumped 9.6 per cent as iron ore, base metals and crude plumbed multi-month lows.

Commodity markets have been squeezed by a rising US dollar and diminishing demand expectations as global growth slows. The spot price for ore landed at Tianjin plunged 14.9 per cent yesterday alone. Copper fell to its lowest in four months. Oil logged its worst run since the early days of the pandemic, falling for six straight sessions.

“The recent fall in commodity prices can be attributed to the fast-spreading Delta variant across countries, which has sparked economic growth concerns,” Kalkine Group CEO Kunal Sawhney said. 

“Investors further appear to be concerned over the Fed’s early withdrawal of the monetary stimulus that helped drive commodity prices higher over the past year. Meanwhile, the recent bounce back in the US dollar seems to be adding to investors’ worries in energy markets, putting pressure on commodities denominated in greenback.” 

The second-largest profit in BHP‘s history barely registered as the company announced a major restructure and a pivot from oil to potash. Shares that traded as high as $54 at the start of the month hit $43.88 this morning before trimming their loss to 0.74 per cent at $44.34.

The dollar also hit the skids this week, losing more than two cents as the greenback appreciated and forex traders sold currencies seen as proxies for commodity prices. The Aussie faded another 0.17 per cent during the session to 71.34 US cents.

Mr Sawhney said investors should be more cautious during this period of market volatility, but look for opportunities to add quality assets.

“At a time when soaring coronavirus cases is heightening risks of market downturns, investors need to embrace a cautious approach while investing,” he said. “To thrive through market volatility, investors can ponder on investing in high-quality companies with low debt, strong balance sheets and good cash flow. Moreover, investing in industries that perform well during tough economic times can also help investors wade through market weakness.  

“Downturns usually offer lucrative opportunities to add high-quality assets at discounted prices to the portfolio. Those looking away from stocks can seek safety in safe havens like gold, which generally holds its value over the long run. However, investors should be aware that gold can also experience drastic price swings like equities over the short term.”  

Winners’ circle

Bond surrogates outperformed as traders sought safe returns as global growth expectations dim. Property group Goodman climbed 2.22 per cent, Telstra 1.26 per cent, Woolworths 1.18 per cent and Coles 0.81 per cent.

US-facing businesses rallied with the greenback. Aristocrat Leisure put on 1.74 per cent, CSL 1.08 per cent and Transurban 0.5 per cent.

Inghams climbed 4.6 per cent to a two-year high as strong demand for chicken helped the poultry specialist double its profit. The company declared a statutory full-year net profit of $83.3 million, up 107.7 per cent. Poultry sales grew 4.2 per cent.

A record year lifted Adairs 1.9 per cent. The linen retailer’s full-year sales increased 28.5 per cent to $499.8 million as a 33.2 bump in online sales helped offset store closures during lockdown. Sales for the first seven weeks of this financial year strengthened 5.2 per cent.

Other companies to advance after reporting included MyState +5.84 per cent, Smartgroup +0.67 per cent and Cleanaway +3.91 per cent. New Hope eased 2.04 per cent, St Barbara 3.12 per cent and Stockland 0.66 per cent.

The big four banks were mixed. CBA gained 0.05 per cent. ANZ dipped 0.18 per cent, Westpac 0.23 per cent and NAB 0.36 per cent.

Doghouse

A fleeting rebound in the major miners largely faded by the close. BHP shed 0.74 per cent. Rio Tinto held on to a gain of 0.06 per cent. Only Fortescue retained most of its initial bounce, rising 1.14 per cent from a five-month low. Newcrest unwound yesterday’s post-earnings rally, falling 3.25 per cent.

Companies further down the food chain continued to struggle. Mineral Resources shed 2.39 per cent, OZ Minerals 2.79 per cent, Pilbara Minerals 5.61 per cent and Lynas Rare Earths 6.91 per cent.  

At the junior end, Globe Metals tanked 25 per cent, Venture Minerals 19.19 per cent, Strike Resources 14.63 per cent, Frontier Resources 17.39 per cent and Charger Metals 18.33 per cent.

Cochlear retreated 7.43 per cent from record levels after full-year revenue missed expectations. The hearing implant specialist achieved record sales of $1.493 billion, narrowly short of the $1.5 billion anticipated by analysts. Underlying net profit grew 54 per cent to $237 million.

TPG Telecom faded 0.45 per cent as the company looked to synergies from the merger of TPG and Vodafone Hutchison Australia to deliver over the next six months. The company hopes to save $70 million in reduced costs this year after reporting an 8 per cent decline in half-year net profit to $76 million.

Shares in Sydney Airport eased 0.26 per cent on a lockdown-affected $97.4 million loss for the first six months of the year. Earnings declined 29.8 per cent from the same period last year as passenger numbers slumped 36.4 per cent.

“We were encouraged to see passenger traffic rebound strongly every time borders were open,” CEO Geoff Culbert said. “We’re optimistic that this trend will repeat itself as the vaccine program gains momentum and we see a sustained easing of restrictions,” he added.

Other markets

Asian markets added to losses as the session wore on. The Asia Dow shed 0.87 per cent, China’s Shanghai Composite 1.91 per cent, Hong Kong’s Hang Seng 2.01 per cent and Japan’s Nikkei 1.14 per cent.

S&P 500 futures wilted nine points or 0.2 per cent.

Oil pushed higher after falling for a sixth night, its worst run since the early days of the pandemic. Brent crude firmed 23 US cents or 0.35 per cent to US$66.68 a barrel.

Gold rallied for the first time in four sessions, rising US$5.60 or 0.3 per cent to US$1,788.70 an ounce.

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