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Aussie stocks finished in the red but well off session lows as bargain-hunters took advantage of the cheapest prices in eight weeks.

The S&P/ASX 200 slashed a 99-point opening drop to 40 points or 0.54 per cent by the close.

The mining and tech sectors led the recovery as iron ore rose and bond yields declined. Speculative stocks, shopping centres and travel companies bore the brunt of the selling.

What moved the market

Dip-buyers stepped in as shares traded at levels last seen on October 1. While just two sectors finished ahead, all sectors closed above session lows.

The market pared its fall as risk assets rebounded. US equity futures, crude oil, iron ore and the Australian dollar all rose today in a sign some investors believe the Omicron variant may pose a lower threat to global growth than Friday’s heavy selling suggested.

David Bassanese, chief economist at BetaShares, was among those predicting the long-term impact of the new variant on financial markets may be limited.

“While it’s still early days, my hunch is that Omicron won’t lead to new lockdowns – as while it may well be highly transmissible, it’s symptoms may prove to be not too severe. If my hunch is right, the current sell-off in equity markets represents a good buying opportunity,” he said.

CommSec economists Craig James and Ryan Felsman were more wary.      

“The cautious and risk-averse approach taken to news of Omicron is understandable,” they wrote. “In particular, the potentially high transmissibility of the new variant is triggering most investor concern. In fact, the South African health authorities have reported that Omicron appears to be out-competing other Covid-19 variants much faster than the previous variants of concern did, like Delta and Beta.” 

“That said, sharemarket valuations are stretched and investors are largely overweight shares, potentially exacerbating a potential sell-off. Investors should therefore monitor the situation closely,” they added.

S&P 500 futures bounced 36 points or 0.8 per cent, signalling possible relief when Wall Street reopens tonight. Brent crude rallied US$2.59 or 3.6 per cent to US$74.18 a barrel, reversing around a third of Friday’s loss.

The dollar – another useful gauge of the market’s appetite for risk – rose 0.25 per cent to 71.37 US cents against the greenback (a traditional haven in times of uncertainty).

The market finished off its high after Japan became the latest nation to close its borders to foreign travellers. Also weighing was negative news from China’s property market. Evergrande sank 8.4 per cent after the company’s chair sold down his interest. Another developer, Fantasia, entered a trading halt amid reports of a missed debt repayment.

Winners’ circle

Tech and mining stocks spearheaded the fightback. The tech sector rallied as a slump in bond yields reduced the cost of borrowing. Technology One advanced 3.11 per cent, Megaport 1.73 per cent, Altium 1.42 per cent and Afterpay 1.34 per cent.

Mining heavyweight Fortescue Metals put on 2.39 per cent as Chinese iron ore futures rallied. December ore futures firmed 6.43 per cent or 6.6 per cent to US$103.72 a tonne, according to TSI data. BHP put on 1.42 per cent, Rio Tinto 0.98 per cent and Mineral Resources 3.35 per cent.

Potential winners from renewed lockdowns also rose. Domino’s Pizza gained 4.09 per cent and online retailer Kogan 1.87 per cent.

Defensive healthcare stocks drew a bid. Ansell climbed 2.1 per cent, Healius 2.53 per cent and Sonic Healthcare 2.64 per cent. CSL slipped 1.6 per cent.

A broker upgrade from Jefferies lifted Bendigo Bank 0.59 per cent off a 12-month low.

Myer finished flat in a falling sector after securing a four-year funding package to replace existing credit facilities. CEO John King said the new facility may ultimately help the chain store resume dividend payments.

Doghouse

A sharp retreat in yields pulled the banks to multi-month lows. CBA dropped 1.09 per cent, ANZ 1.66 per cent, NAB 1.63 per cent and Westpac 0.76 per cent.

Friday’s carnage in oil markets dragged on energy stocks. Woodside shed 1.67 per cent, Oil Search 2.01 per cent and Santos 1.54 per cent.

A wave of border closures and travel bans weighed on travel and tourism companies. Webjet shed 2.8 per cent, Flight Centre 0.88 per cent, Corporate Travel Management 2.36 per cent and Qantas 2 per cent.

Shopping centre landlords wilted under the threat of further lockdowns. Unibail-Rodamco-Westfield skidded 6.19 per cent, Vicinity Centres 4.78 per cent and Scentre Group 3.8 per cent. Casino groups Star Entertainment and Crown Resorts fell 2.5 and 0.98 per cent, respectively.

Packager Pact Group sank 12.63 per cent after CEO Sanjay Dalay warned underlying earnings will be lower this half, due to weak demand and higher input costs.

Mesoblast slipped 0.88 per cent after Chair Joseph Swedish told today’s AGM the next 12 months would be “pivotal” as regulators determine the fate of several of the biotech’s experimental treatments. The company has several potential treatments for inflammatory conditions in the pipeline.

The speculative end of the market fell for the eighth time in ten sessions. The S&P/ASX Emerging Companies Index sank 1 per cent.

Other markets

A red session on Asian markets saw the Asia Dow lose 1.06 per cent, China’s Shanghai Composite 0.04 per cent, Hong Kong’s Hang Seng 1.52 per cent and Japan’s Nikkei 1.25 per cent.

Gold rallied US$7 or 0.4 per cent to US$1,792.50 an ounce.

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