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Risk-off moves on overseas markets thwarted a second day of gains for Australian shares amid doubts over the resilience of this week’s bear market rally.

The S&P/ASX 200 unwound a 34-point opening surge as US equity futures retreated, along with crude, iron ore and gold.

By the close, the index was down 15 points or 0.23 per cent, sealing its eighth loss in nine sessions.

Gains in energy producers and defensive sectors were outweighed by declines in property, tech and consumer stocks.

What moved the market

A promising opening rise ran out of steam as overseas markets turned defensive. A rally in the US dollar pressured commodity prices. A collapse in US equity futures raised questions over the strength of last night’s US recovery.

S&P 500 futures slumped 46 points or 1.2 per cent by the Australian close. A fall of that scale tonight would unwind much of last night’s 2.45 per cent rebound. European futures also fell.

Oil overthrew last night’s gains, plus more. Brent crude slumped US$4 or 3.5 per cent this afternoon to US$110.65 a barrel.

Iron ore resumed a sell-off that knocked prices down more than 20 per cent in the last two weeks. Ore prices fell 4.6 per cent on China’s Dalian Commodity Exchange.

The risk-off moves preceded testimony tonight from Federal Reserve Chair Jerome Powell before the Senate banking committee. Having previously dismissed inflationary pressures as “transitory”, the central bank faces a delicate balancing act in bringing inflation down without driving the economy into recession.

“All eyes are now glued to the Fed Chair’s semi-annual address before Congress on Wednesday and Thursday, where his pledge of an unconditional battle against high inflation will be scrutinised by lawmakers,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Speculations are rife that the Fed Chair will hold firm on his plan for a more aggressive monetary tightening policy until inflation is brought under control.

“However, concerns loom that a more aggressive fight to quash surging price pressures could result in an economic downturn, impacting consumer demand. It seems imperative for the central bank to move with caution and not too fast that the economy tips into a recession.”

Winners’ circle

Energy producers led for a second day before a reversal in Brent crude whittled their gains. Beach Energy cut its advance to 2.78 per cent, Woodside Energy 1.95 per cent and Santos 1.21 per cent.

A 4.2 per cent rally in gas infrastructure group APA lifted the utilities sector. Other notable advances included Iress +4.51 per cent, REA Group +3.89 per cent and Ampol +3.81 per cent.

Queensland coal miner Stanmore Resources bounced 11.48 per cent after slamming government royalty increases. CEO Marcelo Matos said the company was “very disappointed” in the changes.

“The increases to the royalty rates without formal notice or consultation with the industry are unprecedented. The impact of these increases will be felt the most by workers and suppliers in regional Queensland communities that underpin the resources sector and make it Queensland’s largest export industry,” Matos said.

Fletcher Building climbed 2.25 per cent off a 19-month low after forecasting a $100 million increase in earnings in FY23. The building products manufacturer expects to make $750 million this financial year.

A pair of contract wins in New Zealand helped lift Downer EDI 2.82 per cent. The engineering group was awarded road maintenance contracts by Auckland Transport worth $800 million over ten years.

Doghouse

The beleaguered  BNPL sector was back under the pump. Splitit dropped 10.71 per cent to an all-time low. Zip Co fell 11.43 per cent. Afterpay parent Square dipped 1.42 per cent.

The biggest heavyweight drags were Goodman Group -1.6 per cent, Transurban -1.43 per cent and Macquarie Group -1.01 per cent.

St Barbara slumped 18.14 per cent to a six-and-a-half-year low after deferring a decision on expanding operations at its Simberi mine in PNG. The gold miner will instead carry out a strategic review to decide where best to allocate capital across its three operations.

Waste manager Cleanaway slid 2.24 per cent on news repairs to its New Chum landfill in Queensland will likely continue right through the next financial year and cost up to $40 million. The firm will also incur $6 million in net costs this financial year fixing flood damage at other sites.

A boardroom rift led to a mass exodus of directors at finance firm Humm Group. Five directors announced they will quit, citing unwillingness to work with Andrew Abercrombie after he opposed the sale of the firm’s consumer finance operation to Latitude. The share price fell 3.81 per cent.  

Asset manager Janus Henderson eased 2.77 per cent. Ali Dibadj will join as CEO.

Fisher & Paykel Healthcare declined 2.77 per cent as its shares traded ex-dividend.

Other markets

Asian markets turned negative in afternoon action. The Asia Dow shed 1.09 per cent. China’s Shanghai Composite dipped 0.23 per cent. Hong Kong’s Hang Seng lost 1.34 per cent. Japan’s Nikkei eased 0.13 per cent.

Gold wilted US$12.10 or 0.66 per cent to US$1,826.70 an ounce.

The dollar declined 0.7 per cent to 69.12 US cents.

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