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Aussie shares pared solid early gains as rising rates and stronger-than-expected Chinese consumer prices sharpened global inflation worries ahead of tomorrow’s US data.

The S&P/ASX 200 slashed an early 47-point surge to seven points or 0.1 per cent as US futures and Asian markets retreated.

Advances in banks, supermarkets and precious metal miners were largely offset by declines in tech stocks and bulk metal miners.

What moved the market

Start-of-the-week optimism dwindled as US equity futures retreated. S&P 500 futures sank 26 points or 0.6 per cent this afternoon as the cost of borrowing continued to rise.

The yield on ten-year US treasuries climbed 11 basis points this afternoon to a two-year high. The increase preceded March inflation data tomorrow night that is expected to underline the pricing pressures facing corporate America.

“If inflation gets stuck above 3% then the Fed will need to hike until growth drops close to zero, risking a recession,” Bank of America economist Ethan Harris said.

The Australian ten-year bond yield cracked 3 per cent today for the first time since 2015, boosting lenders and weighing on borrowers. Bank stocks rallied, while borrowing-dependent growth stocks declined.

Asian shares fell after Chinese data came in hotter than economists predicted. Consumer prices increased 1.5 per cent last month, accelerating from growth of 0.9 per cent the previous month. Factory-gate prices moderated to 8.3 per cent growth from 8.8 per cent in February.

“CPI inflation rose, while PPI inflation edged lower. Overall consumer price inflation will likely stay low, due to the weak domestic demand, as many cities are locked down,” Zhang Zhiwei, chief economist at Pinpoint Asset Management, said.

The Asia Dow fell 0.97 per cent, China’s Shanghai Composite 2.24 per cent and Hong Kong’s Hang Seng 3.04 per cent.

Winners’ circle

The big four Australian high-street banks marched higher on the expectation they will enjoy stronger margins as interest rates reset towards neutral this year. NAB rallied 1.51 per cent, CBA 1.42 per cent, ANZ 0.73 per cent and Westpac 0.58 per cent.

Also strong were gold miner Newcrest +2.14 per cent, supermarket Woolworths +1.03 per cent and rival Coles +1.1 per cent.

Nickel miner Western Areas jumped 5.48 per cent to $3.85 after suitor IGO Ltd increased its offer. IGO raised its takeover proposal to $3.87 per share from $3.36 to reflect higher nickel prices. IGO shares rallied 2.34 per cent after the Western Areas board backed the revised bid.

BlueScope Steel announced it will triple its metal coating and painting capacity in the US by acquiring the country’s second-largest metal painter for US$500 million. The acquisition of Coil Coatings will expand the company’s footprint on the eastern coast. The share price rallied 1.27 per cent.

An offtake agreement with Ford lifted lithium miner Lake Resources 6.99 per cent. The companies signed a non-binding memorandum of understanding for Lake to supply the car-maker with 25,000 tonnes of lithium per annum.  

Worley climbed 1.68 per cent to a two-year high on news the engineering group will appeal against a judgement emerging from a class action lodged in 2015. The company’s insurers will largely fund the action.

Telix Pharmaceuticals firmed 2.27 per cent after licensing the worldwide rights to commercialise radiolabelled forms of Eli Lilly’s olaratumab antibody for treating cancer.

Junior biotech ResApp jumped 22.22 per on a takeover offer from Pfizer. The US multinational offered 11.5 cents per share, valuing the Australian digital health company at $100 million. The ResApp board unanimously recommended shareholders accept the offer, pitched at a 27.8 per cent premium to Friday’s closing price.

Doghouse

The tech sector fell 0.85 per cent to its fourth loss since the RBA signalled it was preparing to raise rates. Megaport gave up 3.1 per cent, Novonix 2.8 per cent and Appen 2.67 per cent.

Other rate-sensitive growth stocks to weaken included Polynovo -4.98 per cent, Tyro Payments -3.86 per cent and Nanosonics -2.27 per cent.

Uranium miners pared two days of strong gains that followed the announcement of a UK plan to expand its nuclear energy program. Paladin Energy sagged 3.87 per cent, Toro Energy 10.34 per cent and Alligator Energy 10 per cent.

At the heavyweight end of the market, Fortescue Metals fell 2.93 per cent, Rio Tinto 1.24 per cent and Wesfarmers 1.16 per cent.

Other markets

Oil turned firmly lower with US futures. Brent crude dropped US$2.05 or 2 per cent to US$100.73 a barrel.

Gold inched up 50 US cents or 0.03 per cent to US$1,946.10 an ounce.

The dollar erased early weakness to trade little changed at 74.47 US cents.

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