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The share market fell to its lowest close in two weeks as a slump in the dollar and worries about shrinking bank profits weighed.

The S&P/ASX 200 dropped 50.5 points or almost 0.7 per cent to a second straight loss.

The largest listed company on the ASX, Commonwealth Bank, plunged more than 8 per cent after shrinking margins dented its September-quarter profit. The rest of the big three sold off as investors extrapolated the problem to the wider lending industry.

A rampant US dollar bulled the Aussie to its weakest in six weeks. The Australian unit was last down 0.26 per cent at 72.82 US cents.

What moved the market

Fierce competition among home lenders knocked an unexpected hole in CBA‘s September cash profits. While $2.2 billion for three months’ work is nothing to be sneered at, investors expected more. Importantly, the profit was 9 per cent lower than the average of the two previous quarters.

Investors searching for an explanation honed in on contracting margins. The bank pointed to competition among home lenders, a switch to lower-margin fixed rate loans and the on-going effect of record low official rates. Shareholders voted with their feet, sending the share price down 8.07 per cent.

The rest of the big four quickly followed. ANZ sank 2.04 per cent, NAB 1.09 per cent and Westpac 1.67 per cent. Some of that cash found its way to investment bank Macquarie, which hit a fresh all-time high before trimming its rise to 0.56 per cent.

Turmoil in the financial sector turned what was expected to be a positive session on its head. Pre-market futures pointed to a rebound session following overnight gains in the US. The S&P 500 rallied 0.39 per cent to within 1 per cent of its old high.

Today’s action dragged the index further from its August high above 7600. The recovery since the September sell-off has stalled several times over the last three weeks just below 7500. The index closed at a two-month high of 7470 on Monday but has since given up 100 points in two sessions.

“A few signs of economic weakening are apparent in the market, such as consumer confidence that slid below its level of a year ago for almost a year for the first time since late November 2020. It seems Aussies are becoming less confident over their personal financial situations amidst the pandemic-driven challenges,” Kalkine Group CEO Kunal Sawhney said.

“Meanwhile, weaker-than-anticipated employment data for October and growing inflation expectations appear to be undermining consumer confidence to some extent.”   

Winners’ circle

Uniti Group was the day’s best performer, rising 8.29 per cent following a well-received trading update. The telecom infrastructure specialist said it was on track to beat the consensus forecast for full-year underlying earnings.

EML Payments climbed 3.56 per cent from six-month lows after reporting strong growth in profits and revenues over the first quarter. CEO Tom Cregan told today’s AGM revenues were up 29 per cent on the prior comparative period to $52.4 million. Gross profit increased by 20 per cent to $34.4 million.

Car dealership Eagers Automotive advanced 4.41 per cent on news full-year profit is expected to almost double this year. In a trading update, the company forecast underlying operating profit this calendar year will rise to $390-$395 million from $209.4 million last year.

Afterpay added 2.09 per cent as Chair Elana Rubin urged shareholders to support a takeover offer from US giant Square. Ms Rubin said Square’s proposal was an opportunity to become “part of a high-growth global company”. Shareholders will vote on the deal on December 6.

Other heavyweights to advance included Wesfarmers +0.87 per cent, CSL +0.51 per cent and Telstra +1.01 per cent.

Doghouse

Nufarm fell 8.57 per cent after CEO and Managing Director Greg Hunt warned of margin pressure. The crop protection specialist reported a 51 per cent rise in full-year underlying earnings on revenues of $3.2 billion.  

“Early indications from the first six weeks of FY22 are that this positive momentum should continue,” Mr Hunt said. He added, “Increasing cost of raw materials as well as global logistics and supply chain challenges, will continue to pressure margins, however we expect price increases and volume growth will provide an offset.”

United Malt eased 1.69 per cent after warning of a cost hit from importing grain into north America to offset supply issues caused by drought in Canada. The company will supplement local supply by importing malting barley from Denmark and Australia at an additional cost of $8-12 million.

Seek retreated 1.29 per cent from record levels after forecasting full-year earnings will be at the upper end of guidance. The job advertising firm also expects revenues and profit at the upper end of previously forecast ranges.

The heavyweight miners wilted as a rising greenback pressured dollar-denominated commodities. Newcrest sagged 2.1 per cent, BHP 1.45 per cent, Rio Tinto 0.98 per cent and Fortescue Metals 1.89 per cent.

Other markets

A mostly red session on Asian markets saw the Asia Dow shed 1.18 per cent, Hong Kong’s Hang Seng 0.46 per cent and Japan’s Nikkei 0.34 per cent. China’s Shanghai Composite rose 0.21 per cent.

US futures marked time. S&P 500 futures eased a point or 0.03 per cent.

Oil unwound last night’s advance. Brent crude slid 70 US cents or 0.85 per cent to US$81.73 a barrel.

Gold recouped a portion of last night’s US$12.50 loss, rising US$2.90 or 0.15 per cent to US$1,857 an ounce.

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