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Australian shares slipped to their lowest in more than a week as Chinese economic data missed expectations and investors trimmed exposure ahead of a potentially explosive Federal Reserve economic outlook.

The S&P/ASX 200 declined 51 points or 0.7 per cent. Just one sector resisted the downtrend.

Gold miners and tech stocks were among the day’s biggest drags. Coles, NAB and ANZ were the pick of the heavyweights.

What moved the market

Investors were handed plenty of reasons to take to the sidelines this session. Weak overseas leads, a spike in Covid cases in NSW and further evidence of a slowdown in the Chinese economy ensured the market remained under pressure all session.

US and European stocks slid overnight as record US producer prices increased the heat on the Federal Reserve to throw the brakes on an over-inflating economy. The US central bank is due to update the market at 6 am AEDT tomorrow.

“Speculations are rife that rising inflationary pressures and Omicron worries will prompt the central bank to embrace a faster tapering of its bond purchases. In case the central bank accelerates its stimulus withdrawal, it might pave the way for sooner-than-expected interest rate hikes in the coming year,” Kalkine Group CEO Kunal Sawhney said.

The S&P 500 dropped 0.75 per cent to a second straight loss. The pan-European Stoxx 600 shed 0.84 per cent.

A lunchtime Chinese economic update did little to lift the mood. Unemployment crept up a point to 5 per cent. Retail sales grew 3.9 per cent year on year, versus expectations for an increase of 4.7 per cent. Fixed asset investment also missed expectations. Industrial production was in line with forecasts.

A dramatic spike in reported Covid cases in NSW this morning added to headwinds. The state reported a 70 per cent increase in new cases to 1,360 from 804 reported yesterday. Today’s tally was nine times last month’s lowest daily figure. Case numbers have accelerated sharply since the emergence of the omicron strain.

“In Australia, the rising number of Omicron variant cases in some parts of the country has become a new cause of concern for health authorities and government alike,” Kalkine’s Sawhney said.

“The Omicron variant has emerged at a time when the world is already battling inflationary pressures resulting from supply chain constraints and reviving consumer demand. The dual trouble of surging inflation and virus cases has dampened hopes of the Australian economy entering the new year on a firm footing.

“Although the RBA does not expect the Omicron variant to derail the country’s economic recovery, a transitory impact on economic growth seems unavoidable.”

Westpac’s monthly survey showed consumer optimism took a hit from the new variant. The bank’s sentiment index eased 1 per cent to 104.3 as optimism fell sharply in states that had experienced recent lockdowns. Declines of 3.6 per cent in NSW and 3.5 per cent in Victoria were partly offset by improvements in Queensland, SA and WA.  

Winners’ circle

Westpac firmed 0.29 per cent after Chair John McFarlane apologised to shareholders for a “disappointing” year. The bank’s shares fell from above $26 in October to below $21 earlier this month after full-year earnings highlighted the impact of a mortgage price war on margins.

“Overall, the result was disappointing, leading to a drop in our market value for which I apologise unreservedly on behalf of the Board,” McFarlane told today’s AGM.

“Be assured, remedial action has been instituted by the Board and management to improve performance going forward, including a plan to reduce costs materially over the next three years without jeopardising investment in infrastructure and revenue opportunities.”

NAB gained 0.46 per cent and ANZ 0.4 per cent. CBA dipped 0.63 per cent.

Helloworld Travel rallied 16.16 per cent after selling its corporate and entertainment business to Corporate Travel Management for $175 million in cash and equity. The proceeds will be used to pay down debt, provide liquidity and grow the travel agent’s retail and leisure businesses.

Corporate Travel Management entered a trading halt for a capital raising to fund the acquisition.

Insignia Financial shrugged off news the corporate regulator launched an action against the company’s OnePath custody business. Shares in the asset manager formerly known as IOOF Holdings rose 0.56 per cent. The action relates to issues before Insignia acquired the business from ANZ.

Investment manager Challenger climbed 1.21 per cent after naming Nick Hamilton as its new CEO and Managing Director. Hamilton has headed the firm’s funds management business since 2019.

The day’s best performers were UK lender Virgin Money +4.05 per cent, aluminium manufacturer Alumina +3.88 per cent, coal miner Whitehaven +2.58 per cent and utility AGL +2.41 per cent.

Aside from the banks, the best of the heavyweights were Coles +0.75 per cent and Rio Tinto +0.24 per cent.

Doghouse

Woolworths eased 0.13 per cent after Wesfarmers declared it would not support the supermarket chain’s bid to buy Australian Pharmaceutical Industries (API). Woolworths’ bid is seen as unlikely to succeed without Wesfarmers’ support. The retail conglomerate holds a 19.3 per cent stake in API.

Wesfarmers edged up 0.09 per cent. API shares put on 0.29 per cent.

Evolution Mining fell 5.49 per cent after completing the sale of its Mt Carlton gold mine to Navarre Minerals. The new owner’s shares eased 4.35 per cent during a soft session for gold miners.

The gold sub-sector fell 2.9 per cent. Silver Lake Resources gave up 4.46 per cent, Perseus 4.69 per cent and Newcrest 2.19 per cent. 

Borrowing-dependent growth stocks struggled as market rates rose. PointsBet sank 7.58 per cent, Z1P Co 6.92 per cent and Megaport 5.43 per cent.

Mesoblast fell 5.34 per cent to a 21-month low following the loss of a key product development partnership.

APA eased 0.31 per cent after announcing a 4.2 per cent increase in its interim distribution to 25 cents.  

At the heavyweight end, Afterpay fell 3.12 per cent, Goodman 2.22 per cent and Aristocrat Leisure 1.49 per cent.

Other markets

Asian markets edged higher. The Asia Dow put on 0.32 per cent, Japan’s Nikkei 0.01 per cent, China’s Shanghai Composite 0.07 per cent and Hong Kong’s Hang Seng 0.21 per cent.

US futures traded modestly higher. S&P 500 futures rose six points or 0.13 per cent.

Oil added to overnight losses. Brent crude dropped 77 US cents or 1.04 per cent to US$72.93 a barrel.

Gold dipped US$1.70 or 0.1 per cent to US$1,770.80 an ounce.

The dollar firmed 0.11 per cent to 71.12 US cents.

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