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A new financial year began with a loss as plunges in the dollar, iron ore and US equity futures undercut a bright initial rally.  

The S&P/ASX 200 jumped as much as 56 points at the open before fading to a loss of 28 points or 0.43 per cent. The market traded higher until the last hour of trade.

Gains in property trusts, industrials and utilities partly offset pressure on resource stocks. The dollar slumped to a two-year low as commodity prices skidded this afternoon.

What moved the market

A week of two halves ended meekly as a bright start through the first half of the week gave way to familiar doubts about the strength of the global economy. Solid gains on Monday and Tuesday were undone by three straight losses from Wednesday.

Today’s setback handed the ASX 200 a weekly decline of 39 points or 0.6 per cent – a far cry from Tuesday’s peak, when the index was ahead 185 points.

The first session of FY23 saw the market succumb to steadily souring US equity futures and falls in iron ore and crude oil.

The S&P 500 dropped 0.88 per cent overnight. A 0.9 per cent collapse in S&P 500 index futures this afternoon suggested more weakness ahead after soft consumer spending data pointed to a deceleration in the economy. Tonight’s session is the last until Tuesday as the US takes Monday off for the July 4 holiday.

“Economic data released yesterday did little to allay recession fears,” Kunal Sawhney, chief executive of research group Kalkine, said. “It seems markets have already priced in a recession, but the extent of contraction in economic growth remains unknown.

Consumer spending has started slowing down. The 40-year high inflation appears to be showing an impact on the spending pattern of consumers and that is going to be reflected in corporate earnings, potentially leading to a contraction in valuation multiples of stocks.”

The dollar tumbled 1 per cent this afternoon to a two-year low as iron ore, the nation’s most valuable export skidded 6.4 per cent in China. The Aussie was lately down 0.97 per cent at 68.3 US cents.  

Despite current global weakness, CommSec expects the market mood to improve this year. Chief economist Craig James tips the ASX 200 to bounce around 7-9 per cent this fiscal year, reversing most of FY22’s 10.2 per cent loss.

“Cheaper valuations, attractive dividend yields and Australia’s likely relative economic outperformance is supportive of local shares,” James said.

Winners’ circle

The cost of long-term borrowing continued to fall, easing cost pressures on growth stocks and boosting the appeal of dividend-paying companies that compete with bonds for investment fund flows. The yield on ten-year Australian government bonds dropped eight basis points this afternoon, falling below 3.6 per cent for the first time in almost three weeks.

The REIT sector bounced 1.5 per cent, partly reversing declines earlier in the week as many leading trusts paid distributions. Centuria Capital firmed 5.25 per cent, HomeCo 2.88 per cent and Mirvac 3.29 per cent.

Among the market heavyweights, Goodman Group gained 2.19 per cent, Wesfarmers 0.57 per cent and Transurban 0.83 per cent. NAB firmed 0.44 per cent, CBA 0.35 per cent and Woolworths 0.37 per cent.

Regis Resources bounced 7.69 per cent on reported buying interest from billionaire Andrew Forrest. Overnight, Forrest’s Wyloo investment vehicle tried to secure an additional 15 per cent of the shares in the gold miner to add to its existing 4.9 per cent holding, according to the Australian Financial Review. The raid was abandoned after failing to reach the 15 per cent target.

Pallets business Brambles gained 3.17 per cent after walking away from a plan to transition from wood to plastic to service US giant Costco. Bramble said costs were prohibitive and the companies were unable to agree commercial terms.

A multi-billion dollar contract with the United States Coast Guard lifted shipbuilder Austal 25 per cent. The Australian firm’s US subsidiary won a contract worth up to $4.35 billion to design and build up to 11 patrol boats.

Drinks and hotel group Endeavour firmed 0.66 per cent following news Agi Pfeiffer-Smith will take over as Managing Director of Dan Murphy’s. Pfeiffer-Smith is currently the group’s Chief Strategy Officer.

Doghouse

Growth worries kept commodity prices under pressure. Industrial metals wrapped up their worst quarter in more than a decade with further falls overnight. Iron ore’s quarterly loss passed 10 per cent yesterday before another plunge this afternoon.

BHP shed 2.91 per cent. Rio Tinto gave up 2.3 per cent and Fortescue Metals 3.02 per cent. Coal miners New Hope and Whitehaven dropped 3.47 and 3.31 per cent, respectively. Lithium miner Liontown lost 5.21 per cent. 

A 3 per cent drop in Brent crude overnight helped pull Woodside down 4.37 per cent. Santos dipped 2.83 per cent.

Seven West Media sank 4.88 per cent after launching legal proceedings against Cricket Australia over the current rights agreement. Seven West said it was seeking to terminate the deal and claim damages for contract breaches.

Ingenia Communities Group faded 0.75 per cent on news its full-year result is expected to fall at the lower end of guidance. The seniors community developer said it had faced supply chain and labour challenges.

Other markets

US futures retreated with Asian markets. The Asia Dow fell 1.23 per cent. China’s Shanghai Composite dipped 0.54 per cent. Japan’s Nikkei shed 1.61 per cent. Trade in Hong Kong was suspended for a public holiday.

Brent crude skidded 89 US cents or 0.8 per cent to US$108.14 a barrel.

Gold eased US$2 or 0.1 per cent to US$1,805.30 an ounce.

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