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The share market finished modestly higher as traders dumped speculative and growth stocks in favour of defensive sectors.

The S&P/ASX 200 edged up four points or 0.05 per cent to record back-to-back gains for the first time since the omicron Covid variant was identified.

Gains in supermarkets, utilities and property companies outweighed declines in tech and mining stocks. The modest headline change at the top end of the market disguised major bloodletting at the speculative end. The S&P/ASX Emerging Companies Index tanked 3.4 per cent.  

What moved the market

World markets continue to reprice risk in the wake of the emergence of the omicron Covid variant. Defensive stocks were in today. Any company without a clear profit history was out. Coles, Woolworths and Wesfarmers were the best of the market behemoths, Afterpay the worst.

The speculative end of the market took a bath. The S&P/ASX Emerging Companies Index dived 3.4 per cent to a three-month low. The Small Ords fell 1.52 per cent.

Speculative stocks are often the last domino to fall when markets turn risk-averse. The sector blithely ignored softening at the top end of the market until the middle of last month. Since then, the Emerging Companies Index has fallen 10.7 per cent into a technical correction.  Today’s close was the index’s weakest since September 9.

The tech sector slumped 2.2 per cent. to its worst finish since the start of August after the Nasdaq Composite spearheaded Friday’s sell-off in the US. The Nasdaq sagged 1.92 per cent as investors exited some of the most crowded trades of the pandemic era. The S&P 500 dropped 0.84 per cent.  

The dollar dived below 70 US cents to a 13-month low on Friday as investors retreated to the security of the greenback. The Aussie edged up to 70.24 US cents this afternoon, but remained roughly a third of a cent from breaking down to an 18-month low.

The market eventually appeared to take heed of a rise in US equity futures following promising omicron news over the weekend. S&P 500 futures firmed 21 points or 0.5 per cent.

“The first study of hospital patients in South Africa was published on Saturday, pointing to the variant being ‘milder’ than prior variants and suggestive of vaccines being effective,” NAB’s Director, Economics, Tapas Strickland said.  

“Of course the usual caveats of these findings being too early to make a full assessment around severity or vaccine efficacy remain,” he added. “We should get the first lab-based efficacy analysis by Sunday, while further data out of South Africa is expected this Tuesday.”

Winners’ circle

Defensive sectors outperformed as a decline in bond yields encouraged rotation into stocks that compete with bonds for fund flows. Coles climbed 2.65 per cent, Woolworths 2.58 per cent and Wesfarmers 2.1 per cent. APA Group gained 4.45 per cent, BWP Trust 1.69 per cent and Goodman Group 1.42 per cent.

A Covid-fuelled shift in consumer behaviour in favour of neighbourhood shopping helped lift IGA operator Metcash 7.34 per cent. The company reported a 1.3 per cent increase in half-year revenues to $7.2 billion as Australians moved to the regions and shopped local. Underlying profit improved 13.1 per cent to $146.6 million.

“The preference for local neighbourhood shopping and shift from cities to regional areas helped our independent retail networks all deliver ‘like for like’ sales growth in the half,” CEO Jeff Adams said.

Boral climbed 1.62 per cent after offloading its North American Fly Ash business for $1 billion. The sale to Eco Material Technologies will completes a divestment program aimed at unlocking value and refocussing on the core Australian construction materials business.

Gold miners benefitted from the hunt for havens from volatility. Silver Lake Resources put on 4.55 per cent, Evolution 3.71 per cent and Newcrest 1.54 per cent.

Doghouse

Afterpay shares shed 4.32 per cent ahead of a vote next week on whether to accept a takeover offer from US giant Square (since renamed Block). A meeting originally planned for a vote today was opened and adjourned until next Tuesday while the company awaits regulatory clearance from the Bank of Spain.

Among other payment companies, Z1P Co fell 10.14 per cent, Sezzle 16.14 per cent and Tyro Payments 2.9 per cent.

Nearmap dived 7.05 per cent in the wake of Friday’s heavy selling on the Nasdaq. Appen shed 5.44 per cent, Altium 3.76 per cent and EML Payments 3.58 per cent.

News of trouble in the boardroom sent Bapcor down 5.6 per cent. The automotive aftermarket parts business said the position of retiring CEO and Managing Director Darryl Abotomey had become “untenable” and the board had elected to make his departure immediate. CFO Noel Meehan will act up until a permanent replacement is found.

Magellan dropped 3.99 per cent to a 20-month low as a dip in retail funds under management (FUM) overshadowed an increase in institutional funds. Retail FUM declined to $30.229 billion from $30.303 billion.

A profit downgrade drove Sigma Healthcare down 7.62 per cent to a pandemic-era low. The pharmacy business said it now expected underlying full-year earnings to be 10 per cent lower than FY21. The company had previously predicted growth of 5 per cent.  

CSL remained under pressure from speculation about a major acquisition. Shares in the biotech sank 0.46 per cent to a near two-month low. BHP shed 1.59 per cent and Rio Tinto 1.78 per cent.

Other markets

Most Asian markets lost ground. The Asia Dow dropped 0.68 per cent, Hong Kong’s Hang Seng 1.26 per cent and Japan’s Nikkei 0.31 per cent. China’s Shanghai Composite improved 0.37 per cent.

Oil rallied after six straight losing weeks. Brent crude climbed US$1.41 or 2 per cent to US$71.29 a barrel.

Gold eased US$1.80 or 0.1 per cent to US$1,782.10 an ounce.

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