A resilient share market marked time in the face of weak leads, rising Covid case numbers in NSW and a profit warning from Woolworths.
The S&P/ASX 200 closed nine-tenths of a point or 0.01 per cent lower after earlier sliding 38 points following overnight declines on US and European markets.
Gains in defensive sectors and miners helped offset heavy selling in Woolworths and a decline in Afterpay after shareholders backed a US takeover.
What moved the market
The Australian market was a regional outlier as local investors looked past pre-Fed posturing on Wall Street. US stocks dipped overnight ahead of a two-day Federal Reserve policy meeting. The S&P 500 dropped 0.91 per cent, the Dow 0.89 per cent and the Nasdaq 1.39 per cent.
Asian markets took the bait. The Asia Dow shed 0.62 per cent. China’s Shanghai Composite gave up 0.31 per cent, Hong Kong’s Hang Seng 1.26 per cent and Japan’s Nikkei 0.82 per cent.
Australian stocks held their ground as dip-buyers took advantage of early weakness and shrinking trading volumes. Yesterday’s reported volume of 585 million shares traded was the lowest since mid-July. Volumes historically weaken in the rundown to the holiday season.
Bond proxies provided much of the session’s upside as declining yields encouraged investors to chase better returns on the stock market. The yield on ten-year Australian government bonds sank almost seven basis points this session to its lowest in more than two months. REITs, telcos, healthcare companies and utilities advanced.
The market was untroubled by a spike in Covid cases in NSW. The state today reported its highest daily tally in ten weeks. Case numbers jumped to 804 from 536 yesterday. Last month the daily total of infections fell as low as 135 before the emergence of the omicron variant.
ING has outlined three possible outlooks for living with omicron. The bank’s base case is omicron has a transmission advantage, but existing vaccines provide strong but reduced protection.
In this scenario, the bank’s economists expect growth to slow over the northern winter and for central banks to tighten monetary policy next year, as expected. US growth in 2022 will be a robust 4.4 per cent.
The worst-case scenario includes further lockdowns, a pause in central bank tightening and anaemic growth of 1.3 per cent. The best case is for the recovery to continue and the US economy to grow 5.8 per cent.
Nearmap climbed 4.76 per cent on news its US business will soon overtake income from Australia and New Zealand. The aerial mapping firm expects annualised contract value in North America to surpass its ANZ portfolio by year-end.
“This historical milestone for Nearmap follows the very positive momentum we’re seeing in our business in North America,” CEO and Managing Director Dr Rob Newman said.
Virtus Health soared 33.55 per cent following an unsolicited takeover offer from a US private-equity firm. Shares in the IVF specialist hit $7.04 after BGH Capital offered $7.10 cash per share. Virtus said its board was assessing the conditional, non-binding offer.
Polynovo bounced 15.44 per cent off a pandemic-era low on news of a turnaround in trade. The medical devices manufacturer generated record sales in the US last month and in July.
Charter Hall Group climbed 5.28 per cent to an all-time high in the wake of yesterday’s earnings upgrade. The day’s other outperformers were United Malt +4.77 per cent, tech firm WiseTech +3.59 per cent and litigation funder Omni Bridgeway +3.53 per cent.
Among the heavyweights, Goodman Group firmed 1.99 per cent, Telstra 1.48 per cent and Fortescue Metals 1.3 per cent. BHP added 0.58 per cent and Rio Tinto 0.05 per cent.
Trade in CSL was halted ahead of what is expected to be confirmation the biotech will acquire Swiss giant Vifor Pharma. The company requested a trading halt “pending an announcement regarding a potential material acquisition and associated capital raising”.
The consumer staples sector was the biggest drag on the market after Woolworths reported a blowout in Covid-related costs. The supermarket said first-half earnings would take a $150 million hit from direct Covid costs, plus an additional $60-$70 million in higher operating costs due to disruptions at stores and distribution centres.
First-half earnings were expected to be $1.19-$1.22 billion, down from $1.312 billion in the same period in FY21.
Group CEO, Brad Banducci, said: “The first half of F22 has been one of the most challenging halves we have experienced in recent memory due to the far-reaching impacts of the COVID Delta strain and its impact on our end-to-end stock flow and operating rhythm.”
Shares in the company dived 7.67 per cent to a near six-month low. Rival Coles sank 2.74 per cent. IGA operator Metcash overcame initial weakness to rise 0.67 per cent. Woolworths spin-off Endeavour shed 3.35 per cent.
Afterpay lost 4.08 per cent as shareholders backed a takeover by US giant Block, formerly known as Square. The deal received overwhelming support. 99.79 per cent of proxy votes were in favour of the transaction.
Mesoblast tumbled more than 20 per cent to a 20-month low before paring its fall after a key US partnership collapsed. Novartis terminated an agreement with the Australian company that could have delivered up to $1.25 billion in milestone and post-commercialisation payments.
The decision came after a trial of Mesoblast’s experimental treatment for Covid patients with acute respiratory distress syndrome missed its primary endpoint. Mesoblast shares later trimmed their fall to 17.35 per cent.
Travel and tourism stocks eased in the wake of negative Covid developments in the UK and NSW. Helloworld slipped 2.12 per cent, Flight Centre 2.55 per cent and Webjet 2.76 per cent. Corporate Travel Management shed 2.96 per cent and Qantas 1.01 per cent.
A broker downgrade from Goldman Sachs pushed Bapcor down 0.15 per cent.
US futures edged higher. S&P 500 futures firmed six points or 0.13 per cent.
Oil extended overnight weakness. Brent crude slipped 32 US cents or 0.4 per cent to US$74.07 a barrel.
Gold eased US$2.50 or 0.14 per cent to US$1,785.80 an ounce.
The dollar eased 0.38 per cent to 71.04 US cents.