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The share market lost its fragile hold on four-week highs following reports Melbourne will join Sydney in lockdown from tonight.

A directionless session soured around lunchtime after the ABC reported Victorian authorities would impose a snap lockdown from midnight.

The S&P/ASX 200 was already underwater, but deepened its loss to 19 points or 0.26 per cent. Earlier, the market briefly nudged higher after unemployment fell to its lowest level in a decade.

Gains in the heavyweight miners helped offset declines in the banks, CSL and the BNPL sub-sector.

What moved the market

The market’s tentative recovery this week hit a wall as it became evident the Greater Sydney lockdown was no longer the only source of Covid concerns. The ABC said Victorian government officials were meeting this afternoon to discuss how long to lock down after the state recorded ten new local cases linked to the Sydney outbreak. Mask rules were tightened overnight.

AMP Chief Economist Shane Oliver said the snap lockdown would cost the economy around $800 million a week, but closing briefly now was better than a longer lockdown later.

“Better to head off a longer more economically debilitating lockdown… if cases are allowed to rise significantly,” he tweeted.

Queensland extended existing restrictions in the south-east of the state for seven days after recording three new local cases. South Australian announced tighter restrictions from tonight.

The news was better in NSW, where new local cases fell to 65 in the 24 hours to 8pm last night from 97 over the prior corresponding period. Premier Gladys Berejiklian said the drop showed current restrictions were having an impact.

The market rallied briefly on news unemployment dropped below 5 per cent last month for the first time since 2010. The official rate eased to 4.9 per cent from 5.1 per cent in May.

Economists had expected the jobless rate to hold steady at 5.1 per cent. The economy added a total 29,100 jobs as an increase of 51,600 full-time positions outweighed a decline of 22,500 part-time positions.

Bjorn Jarvis, head of labour statistics at the Australian Bureau of Statistics, said the jobless rate was the lowest since December 2010.  Employment was 1.2 per cent higher than at the start of the pandemic.

“The declining unemployment rate continues to coincide with employers reporting high levels of job vacancies and difficulties in finding suitable people for them,” Mr Jarvis said.  

Overnight, US stocks closed mixed but little changed as investors digested a surge in producer prices, a dovish outlook from the Reserve Bank and a broadly positive slate of corporate earnings. The S&P 500 and Dow edged up a little over 0.1 per cent. The Nasdaq dipped 0.22 per cent.

Growth in Chinese factory activity and retail sales declined less than expected last month from rebound-fuelled levels, but quarterly GDP narrowly missed expectations. Second-quarter GDP grew 7.9 per cent, down from 18.3 per cent the previous quarter and short of the 8 per cent consensus among economists.

Winners’ circle

The materials sector rallied 1.36 per cent to an all-time high despite a negative night on Wall Street for miners. Fortescue Metals put on 2.06 per cent, Rio Tinto 2.23 per cent and BHP 1.12 per cent.  

Gold stocks shone for a second day as a surge in US producer prices encouraged hedging. St Barbara climbed 7.03 per cent, Ramelius 2.83 per cent and Newcrest 1.5 per cent.

Whitehaven Coal climbed 4.55 per cent as investors anticipated a strong full-year result on the back of soaring coal prices. The miner said thermal coal prices were at ten-year highs. Production declined by 34 per cent last quarter from the corresponding prior period.

Spark Infrastructure jumped 6.26 per cent to $2.63 after confirming it had received and rejected two conditional, non-binding offers from a consortium including the Ontario Teachers’ Pension Plan Board and US investment giant Kohlberg Kravis Roberts (KKR).

The initial offer of $2.70 and a revised offer of $2.80 were both substantially higher than the electricity infrastructure firm’s price of $2.30 before news of the approach leaked. The board said the offers undervalued the company, but discussions would continue.

Sydney Airport advanced 0.13 per cent to $7.81 after knocking back a takeover proposal from a consortium of investors. The board said the unsolicited, conditional and non-binding offer of $8.25 per share undervalued the airport and was “not in the best interests of Securityholders”. Shares in the airport traded above $9 shortly before the start of the pandemic.

Fund manager Australian Ethical edged up 0.75 per cent after reporting a 12 per cent increase in funds under management to $6.07 billion last quarter. The quarter saw record in-flows.

Doghouse

Buy now pay later players remained under pressure following PayPal’s launch of an instalment payment plan and news yesterday that Apple will soon follow. Afterpay slipped 2.28 per cent, Z1P Co 5.6 per cent and Openpay 3.1 per cent.

Sezzle bucked the trend, bouncing 5.15 per cent after securing a US$30 million investment from DFS Services, a subsidiary of NYSE-listed digital payments firm Discover Financial Services.  

A rebound in energy prices helped Woodside Petroleum lift sales revenue by 15 per cent last quarter to $1.285 billion. Production dipped 4 per cent due to scheduled maintenance and adverse weather. The share price slipped 0.99 per cent.

The big four banks have lost momentum with a slide in bond yields since inflationary fears peaked in March. The yield on ten-year Australian government bonds traded today at its lowest level since mid-February.

CBA dipped 0.48 per cent, ANZ 0.58 per cent, NAB 0.91 per cent and Westpac 1.11 per cent.

Other markets

The Asia Dow inched up 0.08 per cent. Hong Kong’s Hang Seng climbed 1.05 per cent. China’s Shanghai Composite added 0.79 per cent. Japan’s Nikkei shed 1.22 per cent.

S&P 500 futures eased three points or 0.07 per cent.

Oil added to overnight losses following reports of a possible OPEC+ deal to increase production. Brent crude sagged 55 cents or 0.74 per cent to US$74.21 a barrel.

Gold added to near four-week highs, rising US$5.30 or 0.29 per cent to US$1,830.30 an ounce.

The dollar was steady at 74.79 US cents.

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