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Australian shares clawed back a fraction of last week’s losses as the market struggled to live up to earnings expectations and battled rising Covid numbers and caution ahead of possible US taper news.

Gains through the first half of the week sealed a weekly rise of 27 points or around 0.4 per cent for the S&P/ASX 200. The index trimmed early falls to finish this session three points or 0.04 per cent in the red after shedding as much as 26 points.

Wesfarmers was the biggest drag this session after warning sales had fallen since the start of the financial year. Coles, CSL and Macquarie Bank kept the index near break-even.

What moved the market

Shares have struggled over the last two weeks of earnings season as a collapse in commodity prices compounded a lacklustre response to a wave of share buybacks and record profits. Among the heavyweights, post-earnings rises in the likes of CSL, WiseTech and Qantas have been outweighed by declines in BHP, Rio Tinto, Afterpay, Appen, Coles, Cochlear, Brambles and Woolworths. The banks, which reported earlier in the month, have been marking time.

Wesfarmers joined the list of reporting-day losers, falling 2.75 per cent after warning sales had deteriorated since the end of the financial year. Declines of between 1.5 and 14.3 per cent at Kmart, Target, Officeworks and Bunnings over the last seven weeks took the shine off a 40.2 per cent jump in full-year net profit to $2.328 billion.

“Bunnings’ trading performance in the 2022 financial year is expected to moderate following the extraordinary growth recorded in the 2021 financial year, which saw Australians and New Zealanders required to spend more time at home due to COVID-19 restrictions,” the company said.

The depressive effect of lockdowns on retail activity was underlined by  a 2.7 per cent contraction in turnover across the nation last month. The Australian Bureau of Statistics said turnover declined 8.9 per cent in New South Wales.

A week that began with three straight advances fizzled out as traders pared exposure ahead of a speech tonight from Federal Reserve Chair Jerome Powell that has the potential to set the market tone for the next few sessions, if not weeks. Investors fear another “taper tantrum” if the Fed chief outlines plans to reduce support for the economy.

“All eyes are now glued to the Fed Chair’s statements at Jackson Hole due tonight that could offer some guideposts for the pace and timing of the central bank’s plans to taper asset purchases,” Kalkine Group CEO Kunal Sawhney said. 

“Investors are expected to look for clues on how the central bank will exit from the measures it embraced to rescue the US economy from the virus crisis. Speculations are rife that the central bank may push forward its tapering plans, considering the risks of an economic slowdown from the fast-spreading Delta variant.” 

US stocks declined overnight for the first time in six sessions following an assault on Kabul airport that killed at least 60 Afghans and 13 US military personnel. The S&P 500 retreated 0.58 per cent from record levels

Winners’ circle

Biopharmaceutical Clinuvel was the session’s big winner after surprising the market with record full-year revenue and profit. The share price surged 17.95 per cent to a two-year high after net profit more than doubled to $25.7 million.

Toll road operator Atlas Arteria climbed 6.83 per cent following yesterday’s well-received half-year result. A broker upgrade lifted Blackmores, another of yesterday’s reporters, 6.42 per cent to its highest since May 2019.

Defensive sectors outperformed. Healthcare, REITs and utilities rallied, along with industrials. At the heavyweight end of the market, Coles put on 1.42 per cent, CSL 0.96 per cent, Transurban 0.72 per cent and Newcrest 0.45 per cent.

Further down the food chain, Vicinity Centres added 3.01 per cent, Origin Energy 2.25 per cent, Scentre Group 2.19 per cent and Cleanaway Waste 1.95 per cent.

Among companies reporting, Prime Media jumped 6.25 per cent, Waypoint 1.11 per cent and Avita Medical 7.63 per cent. Australian Finance Group declined 1.01 per cent, NextDC 5.42 per cent and Dusk Group 2.74 per cent. Resolute Mining was flat.

Doghouse

Mayne Pharma fell 11.86 per cent after reporting an 18 per cent decline in  full-year earnings to $66.1 million. The company said its US generic drug business had been impacted by competition, Covid and negative currency movements. Previously-announced impairments contributed to a net loss of $208.4 million.

Lynas Rare Earths eased 3.6 per cent after CEO and Managing Director Amanda Lacaze warned Malaysia’s struggle to contain Covid-19 may “from time to time, affect our production outcomes”. The company reported a record full-year net profit of $157.1 million.

While Wesfarmers was the biggest drag at the pointy end of the market, Aristocrat Leisure fell 2.13 per cent, Afterpay 1.42 per cent and BHP 0.56 per cent.

Yesterday’s best performer, Kuniko, tanked more than 25 per cent before trimming its fall to 5.99 per cent. Shares in the Norway-focussed copper and battery metals explorer surged from a listing price of 20 cents to $3.60 yesterday, prompting a “Please Explain” from the ASX. The company said exploration activities had commenced at two of its projects.

Bega Cheese ended flat despite more than tripling full-year profit to $72.2 million. The company more than doubled in size during the year by acquiring Lion Dairy and Drinks. Chinese demand for infant formula softened as the diagou channel dried up.

Other markets

US futures rallied as key Asian markets advanced. China’s Shanghai Composite rose 0.41 per cent and Hong Kong’s Hang Seng 0.11 per cent. Japan’s Nikkei dipped 0.41 per cent and the Asia Dow 0.11 per cent.

S&P 500 futures climbed nine points or 0.2 per cent.

Oil clawed back most of last night’s loss. Brent crude rallied 88 US cents or 1.25 per cent to US$71.06 a barrel.

Gold firmed US$9.10 or 0.5 per cent to US$1,804.30 an ounce.

The dollar edged up 0.08 per cent to 72.44 US cents.

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