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A late bout of profit-taking sealed the share market’s fifth losing week in six despite gains in mining and banking stocks this session.

The S&P/ASX 200 came within three points of turning positive for the week before slashing its advance to eight points or 0.11 per cent. The final-hour fade consigned the index to a weekly loss of 49.5 points or almost 0.7 per cent.

Gains in Newcrest, CBA and BHP helped offset sharp declines in buy now pay later firms after the US consumer watchdog launched an inquiry into the sector.  

What moved the market

Resource stocks lifted the market to its first advance in four sessions following gains in iron ore, crude oil and industrial metals overnight.

“Market sentiment seemed to be bolstered by robust commodity prices, including oil and iron ore,” Kalkine Group CEO Kunal Sawhney said. “The oil prices appear to be responding to an upbeat economic outlook from the Fed, falling US crude stockpiles, and improving crude demand.

“Iron ore prices are trading higher on hopes of rebounding steel production in China after strict curbs in 2021. Speculations are rife that Beijing will again open the stimulus taps next year to boost economic growth, which could prompt a revival in steel demand.”

US stocks declined overnight as investors reassessed the impact of higher rates next year on balance sheets. The S&P 500 dropped 0.87 per cent. The high-growth Nasdaq Composite skidded 2.47 per cent.

The Nasdaq’s weakness flowed into the local tech sector, which dived almost 4 per cent to its weakest finish since July 30. Tech stocks are particularly vulnerable to increased borrowing costs. The yield on Australian government bonds climbed four basis points today after the US Federal Reserve indicated official rates could increase up to three times next year.

“At a time when rate hike speculations are rife in the market, investors have begun evaluating the impact of this monetary policy tightening on currencies and equities. In a standard economic environment, one can expect an increase in interest rate rates to make the domestic currency stronger and prompt a negative impact on the stock market,” Kalkine’s Sawhney said.

“Rising interest rates tend to attract investment capital from overseas investors seeking higher returns on interest-rate products and bonds, strengthening the local currency. On the flip side, rate hikes make borrowing more expensive for corporates, resulting in an increase in the cost of doing business and a fall in revenues, potentially impacting their stock values.”

Winners’ circle

Bulk metal miners responded to an eight-week high in iron ore and strong gains in industrial metals. Copper jumped 3.4 per cent on the London Metal Exchange after a major Peruvian mine closed. Zinc surged 5.2 per cent, nickel 3 per cent and aluminium 2.8 per cent  The spot price for ore landed at Tianjin climbed 4.6 per cent.

BHP rose 1.82 per cent. Fortescue Metals gained 0.96 per cent. Champion Iron added 5.53 per cent, Nickel Mines 2.25 per cent and South32 1.83 per cent. Rio Tinto closed flat.

Gold was another standout as a falling US dollar helped lift the yellow metal to a three-week high. Northern Star put on 5.59 per cent, Evolution Mining 4.23 per cent and Regis Resources 3.52 per cent. Industry powerhouse Newcrest jumped 3.73 per cent.

“The surge in gold prices can be credited to the much-anticipated Fed’s bond tapering announcement, which was just a bit more hawkish than market expectations. It seems that investors are hedging the potential economic risks from the Omicron variant via safe-haven assets,” Kalkine’s Sawhney said.

NAB told shareholders to expect a better year in 2022. At today’s AGM, Chair Philip Chronican said the bank had good momentum across all businesses and would look to return surplus capital to shareholders. The share price rose 0.28 per cent.

“I am cautiously optimistic that the worst of the economic impact of COVID-19 is behind us,” Mr Chronican said. “I am confident the Australian economy will rebound in 2022, with the protection of having one of the highest rates of vaccination in the world and a booster program now underway.”

CBA gained 2.41 per cent, ANZ 0.73 per cent and Westpac 0.33 per cent.

Other heavyweights to advance included Woodside +0.55 per cent, Wesfarmers +0.1 per cent and Woolworths +0.67 per cent.

Aside from miners, the session’s best performers were trading software maker Iress +5.55 per cent, UK lender Virgin Money +5.42 per cent and infection prevention specialist Nanosonics +5.17 per cent.

Doghouse

The technology sector slumped to a five-and-a-half month low as the prospect of higher borrowing costs weighed on growth stocks. Overnight, the Nasdaq Composite suffered its biggest setback in 11 weeks, falling 2.47 per cent. Here, Life360 fell 7.25 per cent, Megaport 5.31 per cent and Altium 4.86 per cent.

BNPL stocks dived after the US’s Consumer Financial Protection Bureau issued orders to five companies, including Afterpay and Z1P Co, seeking more information on the risks of the loan model. The US watchdog said it was worried about “accumulating debt, regulatory arbitrage, and data harvesting”.

Afterpay said it welcomed the inquiry, but saw its shares plunge 7.63 per cent to a seven-month low. Z1P Co shed 6.07 per cent, Sezzle 9.91 per cent and Openpay Group 7.78 per cent.

EML Payments lost 6.75 per cent following media reports of a class action alleging the payments company failed to advise shareholders promptly about regulatory issues in Ireland. The company said it had not been served with proceedings, but would defend itself.

Transurban declined 0.95 per cent after reaching a deal with the Victorian government to build the West Gate Tunnel Project in Melbourne. The toll road operator and state will split extra costs of $3.4 billion equally.

“We recognise this situation has been disappointing, however we believe this agreement represents the best path forward to deliver the West Gate Tunnel Project in the interests of all stakeholders,” CEO Scott Charlton said.

This week’s flurry of takeover activity in the healthcare sector continued with acquisitions by Sonic Healthcare and Healius. Sonic eased 2.44 per cent after announcing it had acquired US pathology company ProPath for an undisclosed sum. Healius retreated 3.03 per cent after buying bioanalytical laboratory Agilex Biolabs for $301.3 million.

CSL dropped below yesterday’s capital raising price after raising a mammoth $6.3 billion to fund the acquisition of Swiss firm Vifor Pharma. Shares in the biotech fell 90 cents or 0.33 per cent to US$272.10.

Other markets

US futures turned negative in afternoon trade as Asian markets deepened their losses. The Asia Dow shed 0.84 per cent, China’s Shanghai Composite 0.9 per cent, Hong Kong’s Hang Seng 1.28 per cent and Japan’s Nikkei 1.58 per cent.

S&P 500 futures fell seven points or 0.15 per cent.

Oil eased back from a three-week peak. Brent crude declined 68 US cents or 0.9 per cent to US$74.34 a barrel.

Gold added to last night’s gains, rising US$4.90 or 0.27 per cent to US$1,803.10 an ounce.

The dollar drifted 0.13 per cent lower to 71.65 US cents.

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