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The share market sealed its worst losing run of the year with a fourth straight loss as declining commodity prices weighed on miners.

The S&P/ASX 200 finished 37.5 points or 0.5 per cent in the red but off session lows as bargain-hunters were tempted by the lowest prices in two and a half weeks. The index dropped to 7429 before cutting its loss by half.

Despite the partial recovery, the market remained on track for its worst weekly loss since January. The index has fallen 164 points or almost 2.2 per cent in four sessions.

Iron ore miners BHP, Rio Tinto and Fortescue Metals were the biggest drags as ore prices continued to plummet.

Newcrest, Star Entertainment and NRW rallied after reporting earnings. Origin Energy, South32 and Treasury Wine Estates declined.

What moved the market

The market appears to have reached tipping point this week. A fortnight of near-daily records has unravelled since Monday, briefly pushing the index back down to its original breakout level on August 2.

The problem is Covid-19, or more accurately the growing sense record-high share prices no longer reflect growth prospects as the delta variant stifles economic activity in many parts of the world. Iron ore, copper and crude touched multi-month lows overnight in a sign of weakening demand.

“The overall risk-off sentiment still grips the metals complex with Covid hospitalisation rates and death numbers rising,” ING commodities strategists Warren Patterson and Wenyo Yao wrote.

“The latest rout in iron ore continued with SGX [Singapore prices] falling below US$160/t. The recent economic data from China heightened the risk of weaker demand for the rest of the year,” they added.

“There have been growing expectations towards stricter enforcement of production curbs, resulting in deeper cuts in crude steel. This would weigh heavily on iron ore demand. Earlier this week, NBS data showed that China’s steel output fell 8.4% YoY (lowest level in fifteen months) to 86.8mt in July.”

Markets still adjusting to BHP‘s restructure plans and pivot from oil into potash sent the Big Australian’s share price down 6.35 per cent to a near five-month low. Rio Tinto swooned 5.73 per cent, Fortescue Metals 6.15 per cent and Mineral Resources 6.61 per cent.

The day’s Covid-19 case numbers did little to improve the mood. Victoria reported 57 new local cases, the highest of the current outbreak. New South Wales reported 681 cases, also a record.

The dollar lost ground steadily all session, falling to its lowest level of the year. The Aussie was last down 0.6 per cent at 71.88 US cents.

Wall Street had been stubbornly resistant to declines this week on Asia, but sank overnight to its heaviest loss in a month. The S&P 500 and Dow both dropped almost 1.1 per cent.

Back home, the labour market provided a welcome surprise, defying expectations of a downturn. The unemployment rate fell to a 13-year low of 4.6 per cent last month from 4.9 per cent in June as the economy added 2,200 new hires.

Economists had predicted a rise to 5 per cent and a loss of around 42,000 jobs. However, any joy is expected to be short-lived, with the rate set to climb this month as lockdowns bite. 

Winners’ circle

Newcrest was among the best of the heavyweights, rising 1.07 per cent after reporting a record full-year profit. The gold miner increased its final dividend 129 per cent to 40 US cents per share after lifting statutory net profit 80 per cent to $1.21 billion.

News of a return to profitability and plans to sell and lease back its flagship Sydney casino lifted The Star Entertainment Group 6.78 per cent. The casino group declared a net profit of $58 million despite the impact of Covid lockdowns. While the Star Sydney remains closed, the group expects the business to rebound quickly when the lockdown is lifted.

“The experience last year has demonstrated how resilient our business is and how quickly customers return when our properties are allowed to open. This gives us great confidence as vaccination levels increase and a return to normality approaches,” Managing Director and CEO Matt Bekier said.

Exchange operator ASX nudged up 2.32 per cent despite a decline in full-year profit as record-low interest rates affected investment returns and buying interest on futures markets. Operating revenue improved 1.4 per cent due to strong growth in listings.

NRW Holdings was the session’s best performer, surging 17.42 per cent on news the mining contractor’s order book was expected to swell to $4.4 billion. Operating earnings were expected to increase to $145-$155 million this year from $120.6 million in FY21.

Among other companies reporting, HT&E climbed 6.83 per cent, Redbubble 18.95 per cent, Telix 6.15 per cent, The Reject Shop 16.67 per cent, Iress 0.13 per cent, Evolution Mining 1.77 per cent, IPH 5.56 per cent, humm 3.19 per cent, Beacon Lighting 3.95 per cent and Airtasker 1 per cent. Perpetual eased 0.89 per cent and Codan 8.28 per cent.

Select defensive stocks outperformed. Wesfarmers put on 1.73 per cent, CSL 3.16 per cent, Brambles 1.4 per cent, Transurban 1.01 per cent and Coles 1.25 per cent.

Nickel miner Western Areas jumped 12.9 per cent after confirming takeover interest from rival IGO. Shares in IGO fell 5.78 per cent.

Chorus soared 14.24 per cent after the NZ Commerce Commission valued the Kiwi telecom infrastructure specialist’s fibre network at NZ$5.427 billion.

Doghouse

Treasury Wine Estates fell 1.5 per cent after warning growth in its retail and e-commerce markets had moderated. The wine-maker’s full-year earnings were broadly steady at $510.3 million as other markets made up for the loss of Chinese trade. Net profit improved 1.8 per cent to $250 million.

South32 declined 0.69 per cent after reporting a US$195 million statutory loss. The result was driven by a US$764 million impairment charge relating to a rejected application to expand its Illawarra coal operation. Underlying earnings improved 153 per cent to US$489 million. The miner will pay a final dividend of 3.5 US cents per share along with a special dividend of 2 cents per share.

Origin Energy fell 4.12 per cent after reporting a full-year statutory loss of $2.291 billion. Underlying profit collapsed to $318 million from $1.023 billion as prices contracted and Covid undermined business energy demand.  

Companies trading without the right to a dividend included QBE -2.06 per cent, GPT -3.28 per cent and GUD -3.2 per cent.  

Other markets

Asian markets logged solid declines. The Asia Dow lost 1.87 per cent, China’s Shanghai Composite 0.3 per cent, Hong Kong’s Hang Seng 1.57 per cent and Japan’s Nikkei 0.97 per cent.

S&P 500 futures receded 12 points or 0.27 per cent.

Oil plumbed its lowest level since May. Brent crude sagged US$1.05 or 1.54 per cent to US$67.18 a barrel.

A tentative post-Fed rebound in gold faltered. The yellow metal dropped US$4.60 or 0.26 per cent to US$1,779.90 an ounce.

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