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Australian shares overcame weak leads to edge higher late in the session to a second straight gain.

The S&P/ASX 200 wavered between losses and gains before kicking up 15 points or 0.23 per cent in the final hour of trade. The rally built on yesterday’s slim four-point advance.

Soft leads from Wall Street and commodity markets kept buying interest in check for much of the session. Ultimately, gains in Telstra, REITs, travel stocks and most of the banks outweighed declines in resource stocks following multi-month overnight lows in crude oil, iron ore and several metals.

What moved the market

Investors appear to have decided discretion is the better part of valour ahead of several risk events this week. The ASX spent most of the day near flat before a late burst of buying interest.

Overnight, US stocks sold off into the closing bell with short-term traders reluctant to carry their positions into tonight’s June consumer price index (CPI) and a new corporate earnings season. The S&P 500 fell 0.92 per cent.

Brent Schutte, chief investment officer at Northwestern Mutual Wealth Management in the US, told Reuters investors were “waiting to hear what happens with CPI and earnings. For several months we’ve swung back and forth between inflation fears and recession fears, almost on a daily basis.

“We have really confused investors who have chosen to go on a buyers strike,” he added.

The market anticipates an increase in headline inflation in the US, cementing the argument for another jumbo rate hike this month.

“Tonight’s US inflation data… is expected to hit a pandemic peak, making a case for another 75-basis points rate hike by the US Federal Reserve,” Kunal Sawhney, chief executive of research group Kalkine, said.  

“As per a Bloomberg survey, the consumer price index probably surged by 8.8% annually in June. If it happens then, it will be the biggest jump since 1981.”

US futures were kept in check this afternoon by a GDP downgrade from the International Monetary Fund. S&P 500 futures edged up six points or 0.16 per cent.

“Traders have adopted a highly cautious approach with their risk appetite. The further gloomy picture for today’s price action comes from the IMF, which has cut the GDP forecast of the biggest economy in the world, the US,” Naeem Aslam, chief market analyst at AVATrade, said.

“The IMF has cut the US GDP forecast to 2.% from its previous level of 2.9%. The fund also reduced next year’s growth estimate to 1% from its reading of 1.7%, and it predicts that the unemployment rate could increase to 4.6% in 2023. All of this sets the stage for plenty of pessimism and a possible lower open for the US stock market.”

A busy day for central bank action saw the Royal Bank of New Zealand raise its benchmark rate by 50 basis points to 2.5 per cent. Bank of Korea also increased its key interest rate by 50 bp, to 1.75 per cent. The Bank of Canada was expected to raise its benchmark by 75 bp tonight.

Winners’ circle

Tech stocks rose for the first time this week as the cost of long-term borrowing on bond markets retreated. Megaport bounced 7.32 per cent, BrainChip 4.97 per cent and Block 3.66 per cent.

Qantas jumped 4.25 per cent as fuel costs declined and US carrier American Airlines forecast its first profitable quarter since the start of the pandemic.

Brent crude slumped below US$100 a barrel as an up-tick in Covid restrictions in China sharpened demand worries. The international oil benchmark dropped another 30 US cents or 0.3 per cent this afternoon to US$99.19 after tumbling 7.1 per cent overnight.

Traditional havens such as property stocks attracted a bid. Centuria Capital firmed 3.17 per cent, HomeCo 3.82 per cent and Goodman Group 2.37 per cent.

Other defensives to nudge higher included Wesfarmers +1.18 per cent, Telstra +1.04 per cent and CSL +0.38 per cent.

KMD Brands, the outdoor sports retailer that owns Kathmandu and Rip Curl, firmed 0.5 per cent after warning Covid continued to impact footfall and trigger sporadic store closures. A record winter promotional period in Australia and strong margins helped offset weakness in the NZ operation.

Doghouse

Energy stocks fell with crude prices. Woodside Energy slipped 2.9 per cent, Santos 1.29 per cent and Beach Energy 1.18 per cent.

Bulk metal miners dragged as iron ore wallowed near seven-month lows. The most-traded ore contract on the Dalian Commodity Exchange was this afternoon down another 1.3 per cent after falling 5 per cent overnight.

BHP retreated 1.44 per cent. Rio Tinto shed 1.37 per cent. A 20-month low in copper helped pull South32 down 1.41 per cent.

ANZ eased 1.19 per cent after confirming it was in talks to acquire accounting software provider MYOB from US private equity firm Kohlberg Kravis Roberts. The bank said the two parties had yet to reach agreement and there was no certainty a deal would proceed.

Investment manager Platinum fell 2.29 per cent to a four-week low after reporting net outflows of $304 million last month. Funds under management declined to $18.2 billion.

Other markets

Asian markets rallied this afternoon as Covid cases in Shanghai held broadly steady and data showed Chinese exports rebounded in June.

The Asia Dow rose 0.39 per cent. Hong Kong’s Hang Seng firmed 0.06 per cent. Japan’s Nikkei gained 0.43 per cent. China’s Shanghai Composite inched up 0.14 per cent.

Gold faded US$1.50 or 0.1 per cent to US$1,723.30 an ounce.

The dollar bounced 0.38 per cent to 67.72 US cents.

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