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Heavy selling among mortgage lenders dented strong early gains as the share market struggled to move past yesterday’s jumbo interest rate rise.

The S&P/ASX 200 finished 25 points or 0.36 per cent ahead after earlier rising as much as 0.9 per cent.

Early gains dwindled as fear of a wave of mortgage defaults weighed on lenders. Energy stocks, utilities and industrials offered the session’s best returns.

What moved the market

The market was unable to sustain a buoyant start as institutional investors factored in the increased risk of bad debts as the cost of borrowing climbs rapidly.

Lenders wasted no time in passing on yesterday’s 50 basis point increase in the cash rate target. Commonwealth Bank, Westpac, Bank of Queensland, Virgin Money, Macquarie and ME Bank announced increases to their variable home loan rates.

Several of the major banks predicted interest rates will climb quickly over the next few months. NAB expects the RBA to raise the cash rate target by 50 basis points at each of its next two meetings. Westpac predicts a 50-point increase next month, then 25 points in August.

“The Bank now recognises that it has a significant challenge to contain inflation and [yesterday’s] decision points to it now being prepared to act decisively,” Westpac chief economist Bill Evans said. “For that reason, we expect that the next move in July will also be a 50 basis point increase.”

High-street lenders bore the brunt of today’s selling. Bendigo & Adelaide Bank slumped 7.19 per cent. Westpac shed 6.11 per cent. CBA lost 4.4 per cent. NAB gave up 3.95 per cent, Bank of Queensland 4.34 per cent and ANZ 2.29 per cent.

The chief executive of research group Kalkine said consumer-facing sectors faced headwinds.

“Speculations are rife that the cash rate could reach above 2.5 per cent by the end of this year. Given Australia’s high household indebtedness, the rapid pace of rate increase would certainly inflict pain on consumers already struggling with a higher cost of living,” Kunal Sawhney said.

“Thus, consumer-facing sectors such as banking, housing, real estate, retail and consumer discretionary might remain under pressure in the months ahead. The tech sector, which was one of the major beneficiaries of low interest rates during the pandemic phase, might also witness some contraction in valuation multiples as the cost of funds could increase at a rapid pace.”

Declines among the heavily-weighted banks masked the scale of advances in other sectors. Energy stocks jumped 4.2 per cent, utilities 3.2 per cent and industrials 2 per cent.

The rally followed a positive session in the US as a retreat in long-term borrowing costs encouraged traders to buy an early dip. The S&P 500 climbed 0.95 per cent to a second straight gain.

Winners’ circle

The nation’s second-largest toll road operator, Atlas Arteria, jumped 16.2 per cent to $8.25 after IFM Global Infrastructure Fund acquired a 15 per cent interest in the firm at $8.10.

“IFM has indicated that it intends to request from Atlas Arteria access to certain limited company information to assess whether it can submit a non-binding indicative proposal to Atlas Arteria to acquire all of the Atlas Arteria securities it does not already own,” the toll road operator said.

Atlas said no request had been received yet and there was no guarantee an acquisition proposal would follow. Rival Transurban put on 1.35 per cent.

A three-month high in US crude helped fire Woodside Energy up 5.62 per cent to its highest since the start of the pandemic. Santos bounced 3.42 per cent. Beach Energy advanced 1.63 per cent to a 16-month high.

BHP climbed 2.31 per cent to its highest since August as iron ore prices continued to recover with easing Covid restrictions in China. Rio Tinto firmed 2.03 per cent, Fortescue Metals 2.22 per cent and Champion Iron 2.65 per cent.

Boral soared 14.69 per cent on news former Cleanaway chief Vik Bansal will join the building materials manufacturer as CEO and Managing Director.

Scrap metal recycler Sims firmed 0.94 per cent after outlining full-year guidance. The company expects underlying earnings in the range of $750-$770 million, subject to year-end shipping dates.

Uranium miners surged on White House plans to reduce the US’s dependence on imported Russian uranium. Paladin Energy jumped 13.48 per cent, Peninsula Energy 20 per cent and GTI Energy 26.67 per cent.

At the junior end of the market, positive drilling results saw Rimfire Pacific briefly double in value. Aircore drilling at the miner’s Currajong prospect in central NSW intersected “significant anomalous nickel-cobalt mineralisation”. The share price flew from nine-tenths of a cent to 2.3 cents before paring its advance to 22.22 per cent at 1.1 cents.

Doghouse

Buy now, pay later providers were mixed in the wake of Apple’s launch of its own instalment payment system within Apple Pay. Zip Co fell another 3.05 per cent to a fresh five-year low. Sezzle slumped 13.04 per cent. Humm dropped 2.55 per cent. Afterpay parent Block bounced 3.03 per cent. Splitit finished unchanged.

Consumer stocks also traded mixed as investors assessed likely winners and losers from yesterday’s rate hike. City Chic Collective dropped 3.79 per cent, Domino’s Pizza 2.77 per cent, Breville Group 2.14 per cent and Harvey Norman 1.17 per cent.

A profit warning cost the owner of high-street clothing brands Noni B, Rivers and Katies more than half its market value. Mosaic Brands said a weak second half would seal a full-year loss after trading conditions failed to improve as much as expected.

The share price tumbled 55.56 per cent. The group expects to return to profitability in FY23.

Other markets

Asian markets turned mixed in afternoon trade. The Asia Dow advanced 0.8 per cent. Hong Kong’s Hang Seng added 1.79 per cent and Japan’s Nikkei 0.99 per cent. China’s Shanghai Composite faded 0.17 per cent.

US futures soured as the Asian session wore on. At the Australian close, S&P 500 futures were down 11.5 points or 0.28 per cent.

Oil added to overnight gains. Brent crude climbed 45 US cents or 0.37 per cent to US$121.01 a barrel.

Gold dipped US$1.50 or 0.1 per cent to US$1,850.60 an ounce.

The dollar faded 0.28 per cent to 72.01 US cents.

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