The share market closed at an eight-week low as global jitters over the Omicron Covid variant overshadowed news the economy performed better than expected during lockdown.
The S&P/ASX 200 sank for the third time in four sessions. The benchmark retested Monday’s low before cutting its loss to 20 points or 0.28 per cent.
The supermarkets, Telstra and utilities declined. CSL and the major miners cushioned the market from a deeper loss.
What moved the market
Domestic issues have been relegated to the back seat as financial markets work through the economic implications of the new Omicron Covid variant. Wall Street dived on Friday, bounced on Monday, then turned lower still overnight after Moderna’s CEO Stephane Bancel warned existing vaccines were unlikely to be as effective against the new strain. Bancel’s intervention shattered a growing market consensus that Omicron might be little more than a bump on the road to recovery.
The market mood soured further in the US when Federal Reserve Chair Jerome Powell appeared to abandon the bank’s stance that current inflationary pressures are “transitory”. Powell told a Senate banking committee inflationary pressures were “higher” and the bank should wind down support for the economy quicker than the current timetable implied.
Bond yields jumped, equities tumbled. The S&P 500 dropped 1.9 per cent, erasing Monday’s rebound.
“Powell’s turnabout from his initial positive stance on inflation heightened concerns around the latest COVID-19 variant and the US economic recovery,” Kalkine Group CEO Kunal Sawhney said.
The risk-sensitive Australian dollar plunged to a 12-month low. The Aussie traded as low as 70.64 US cents before rebounding a cent this afternoon to 71.67 US cents. Oil and US equity futures also rallied.
The ASX 200 trimmed a mid-morning fall of more than 70 points after data showed the economy contracted less than expected during the September quarter. Gross domestic product shrank 1.9 per cent, significantly less than the 2.7 per cent decline anticipated by economists.
“Domestic demand drove the fall, with prolonged lockdowns across NSW, Victoria and the ACT resulting in a substantial decline in household spending,” ABS Acting Head of National Accounts, Sean Crick, said. “The fall in domestic demand was only partly offset by growth in net trade and public sector expenditure.”
Fortescue Metals shrugged off a broker downgrade from Citigroup, rising 1.53 per cent. Rio Tinto gained 2.42 per cent and BHP 1.35 per cent.
Iron ore has been one of the few industrial commodities untouched by Omicron ructions. The spot price edged back above US$100 a tonne yesterday, supported by restocking by Chinese steel mills.
Wesfarmers bounced 0.32 per cent from yesterday’s end-of-month drop. CSL gained 0.78 per cent and Woodside 0.33 per cent.
Metal detector and communications firm Codan edged up 0.21 per cent after acquiring UK firm Broadcast Wireless Systems. Codan will pay up to $8.5 million if earn-out targets are achieved. The company said the acquisition will be earnings-per-share accretive from day 1.
The day’s best performers were mostly miners and tech firms. South32 climbed 3.97 per cent, Waypoint REIT 3.11 per cent and Lynas Rare Earths 2.71 per cent. Xero added 2.69 per cent, Appen 2.29 per cent and OZ Minerals 2.27 per cent.
ANZ eased 0.22 per cent after class action proceedings were filed against the bank. The action alleges unfair credit card contracts between 2010 and 2019. CBA put on 0.75 per cent, NAB 0.29 per cent and Westpac 0.49 per cent.
GUD slid 7.58 per cent to $10.78 after raising $120 million from institutional investors at $10.40 per share. The funds raised will be used to acquire trailer and 4WD accessory manufacturer AutoPacific Group. GUD also announced it had completed the acquisition of automotive lighting firm Vision X.
Worley shed 0.42 per cent after reaffirming its outlook for the first half. The project manager told investors it saw “positive indicators for improved performance in the second half of this financial year and beyond”.
Investment manager Australian Ethical declined 4.46 per cent despite lifting guidance. The company expects underlying profit to be $5 – $5.5 million. Funds under management increased by 9 per cent to $6.64 billion in the four months to October 31.
Charter Hall Retail REIT tightened its full-year guidance after acquiring a 49 per cent interest in 20 Ampol fuel and convenience retail centres for $50.5 million. The trust expects earnings per unit to be no less than 28.2 cents per unit, a modest upgrade from previous guidance of 27.8 – 28.2 cents per unit. The share price eased 1.68 per cent.
Among companies trading ex-dividend, Incitec Pivot lost 4.38 per cent, United Malt 1.69 per cent and Aristocrat Leisure 0.93 per cent.
A rebound in US equity futures boosted Asian markets. S&P 500 futures rallied 39 points or 0.86 per cent.
The Asia Dow climbed 1.63 per cent, China’s Shanghai Composite 0.11 per cent, Hong Kong’s Hang Seng 1.4 per cent and Japan’s Nikkei 0.75 per cent.
Oil pared a 5.5 per cent overnight loss. Brent crude bounced US$1.80 or 2.6 per cent to US$71.05 a barrel.
Gold firmed US$4.30 or 0.24 per cent to US$1,780.80 an ounce.