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The share market suffered its first setback in almost two weeks as corporate earnings and Chinese economic data disappointed, US futures declined and Melbourne and the ACT extended pandemic lockdowns.  

The S&P/ASX 200 fell 46 points or 0.61 per cent from Friday’s record close. The loss was the index’s first in nine sessions and its heaviest in two and a half weeks.

Bank stocks fell with lending rates. Woodside Petroleum slumped more than 4 per cent after confirming a potential mega-merger with BHP’s oil assets.

What moved the market

The busiest week yet of the corporate earnings season got off to a rocky start as the market took a big stick to several of today’s reporting companies. Falls of more than 7.5 per cent for Bendigo & Adelaide Bank, Beach Energy, Lendlease and Seven West Media outweighed gains of less than 4 per cent for BlueScope, GPT, JB Hi-Fi and carsales.com.

The market’s ability to climb the ‘wall of worry’ was further tested by a steady drip-feed of negative developments as the session advanced. New South Wales announced the highest daily number of new local Covid-19 cases so far. Seven weeks into lockdown, the state recorded 478 new cases and eight deaths.

The ACT then extended its lockdown for two weeks after recording 19 new cases. Shortly after, Melbourne announced a two-week extension with a 9pm curfew.

Travel and tourism stocks bore the brunt. Flight Centre shed 5.27 per cent, Star Entertainment 3.13 per cent, Corporate Travel Management 2.02 per cent, Webjet 3.3 per cent and Qantas 1.76 per cent.

Economists warned extended lockdowns threatened to tear up the Reserve Bank’s economic outlook.

“The RBA’s most recent August SoMP (Statement on Monetary Policy) forecasts are in danger of being out of date within just a week with the detraction in Q3 GDP likely a lot larger than what the RBA had pencilled in,” NAB Director, Economics, Tapas Strickland, said.

Chinese economic data showed the effects of Covid, as well as steel production caps and flooding. Industrial production, retail sales and investment data for last month slowed more than economists expected last month.  

Risk assets, including US futures, crude oil and most Asian markets, declined. S&P 500 futures fell 10 points or 0.23 per cent after the pro-west government in Afghanistan collapsed.

Brent crude sagged 93 US cents or 1.32 per cent to US$69.66 a barrel.  The Asia Dow shed 0.9 per cent, Hong Kong’s Hang Seng 1 per cent and Japan’s Nikkei 1.74 per cent. China’s Shanghai Composite inched up 0.2 per cent.  

Winners’ circle

BlueScope Steel tested fresh highs after becoming the latest ASX company to announce a share buyback. The steelmaker will buy up to $500 million shares on-market after increasing full-year net profit by $1.1 billion to $1.19 billion.

Shareholders will receive a final dividend of 25 cents per share (up from eight cents last year) and a special dividend of 19 cents. The share price rose 0.63 per cent.

GPT firmed 3 per cent after raising half-year net profit to $760.5 million and confirming discussions to acquire a portfolio of industrial and logistics assets from Ascot Capital for $800 million. The diversified property group said it was in exclusive due diligence with Ascot but there was no certainty a transaction would ensue.

Record sales activity helped carsales.com to its strongest profit growth in seven years. Full-year adjusted earnings and net profit increased by 10 and 11 per cent, respectively. The share price rallied 3.85 per cent to a new high.

JB Hi-Fi shrugged off early weakness to advance 2.5 per cent as a strong full-year result overshadowed news of a lockdown-fuelled decline in sales since the start of the financial year. The retailer declared a 67.4 per cent increase in full-year net profit to $506.1 million as sales increased 12.6 per cent. Australian sales fell 14.9 per cent since July 1 amid creeping lockdowns.

A2 Milk was the session’s best performer, rising 12.08 per cent amid reported interest from Swiss giant Nestle. The Australian dairy company’s shares hit a four-year low in May.  

Doghouse

BHP and Woodside Petroleum sank after confirming they were discussing a $20 billion merger of BHP’s petroleum assets with Woodside. Woodside would fund the merger by issuing shares to BHP shareholders. No agreement had been reached. BHP dropped 1.5 per cent. Woodside fell 4.55 per cent.

Three of the big four banks declined with bond yields. CBA gave up 1.43 per cent, ANZ 2.71 per cent and Westpac 1.41 per cent. NAB added 0.07 per cent. The yield on ten-year Australian government bonds dived almost seven basis points to 1.158 per cent.

Bendigo & Adelaide Bank sank 9.91 per cent after announcing it will acquire Melbourne fintech Ferocia to expand its digital strategy. The acquisition will be paid for by issuing up to $116 million in shares. A 172 per cent increase in full-year statutory profit to $524 million was clouded by a rise in costs and reduction in margins.  

Seven West Media retreated 7.77 per cent as an increase in operating expenses and the absence of a dividend took the shine off a strong rebound in profit. Full-year underlying earnings surged 141 per cent. Statutory net profit swung to $318.1 million from last year’s loss of $201.2 million. However, the media giant said operating expenses would increase this year from $1.02 billion to up to $1.1 billion.

The prospect of another “challenging year” for property construction helped drag Lendlease down 7.55 per cent. The building firm declared a full-year profit of $222 million but warned enforced lockdowns would continue to impact its business.

An impairment charge of $117 million on Beach Energy‘s Western Flank operation helped knock the oil and gas explorers’ full-year net profit down 37 per cent to $317 million. The company expects production this year to be impacted by declines at Western Flank. Shares in the explorer fell 9.92 per cent to their lowest since March last year.

A cautious outlook and a decline in full-year profit helped pull Argo Investments 0.81 per cent off record levels. The investment manager’s profit fell 13 per cent to $174 million from $199.5 million in FY20 despite a strong year for its investments. Net tangible assets increased by 28.5 per cent. The company kept its dividend steady at 14 cents per share.  

“Overall, we are more cautious in our outlook than previously, due to the combination of the market trading at record highs and the ramifications of ongoing COVID-19 restrictions hampering a considerable portion of the economy,” the company said.

Sydney Airport dipped 0.65 per cent to $7.70 after rejecting a revised takeover offer. The company said an increased offer of $8.45 (up from $8.25) from a consortium of superannuation funds still undervalued its infrastructure assets.

Other markets

Gold faded US$2.80 or 0.16 per cent to US$1,775.40 an ounce as the US dollar firmed.

The Australian dollar extended its retreat to 0.42 per cent at 73.34 US cents.

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