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Aussie shares tested record levels before closing flat as “taper” fears weighed on US equity futures, gold and crude oil.

The S&P/ASX 200 rose as high as 7567 before finishing unchanged at 7538. The market gave up its gains as US futures wallowed in the red, crude shed almost 2 per cent and gold plunged in volatile trade.

The financial sector pushed back towards four-year highs following an upbeat earnings update from Suncorp. Mining stocks extended last week’s losses.

What moved the market

A bright start for Australian equities faded as broader movements in financial markets suggested investors were having second thoughts about Friday’s knockout US jobs figures. The Dow and S&P 500 closed at record levels on Friday on unexpectedly strong July labour data.

US futures retreated amid speculation the report may have brought forward the moment the Federal Reserve starts to withdraw support for the economy. S&P 500 futures declined nine points or 0.2 per cent this afternoon. Nasdaq futures fell 0.28 per cent.

“A solid US labour market report takes us one step closer to a Fed tapering announcement,” NAB currency strategist Rodrigo Catril said. “Overall, there is not a lot of disagreement on a taper announcement coming sometime between September-December followed by actual tapering sometime between November and January,” he added.

Gold tumbled more than 4 per cent to a four-month low in thin, holiday-affected trade. Gold dived as low as US$1,672.80 an ounce in US electronic trade this morning before trimming its loss to US$17.20 or 1 per cent at US$1,745.80 an ounce. Silver skidded as much as 7.5 per cent before staging a partial recovery.

“There’s thinner liquidity across Asia given Japanese markets are offline and there’s a public holiday in Singapore, so markets aren’t functioning as efficiently as they would otherwise,” IG market analyst Kyle Rodda told Nine media. “It’s likely there were some big positions liquidated in Asia in response to those job numbers on Friday.”

Precious metals have a broadly inverse relationship with the US dollar and US treasury yields. On Friday, the US dollar surged and yields spiked around eight basis points.

Here, Ramelius Resources sagged 5.57 per cent, Gold Road 4.91 per cent, Silver Lake 4.03 per cent and Newcrest 2.72 per cent.

Winners’ circle

The Australian financial sector climbed 1.3 per cent to within a hair’s breadth of a record. A well-received full-year report from Suncorp lifted rivals IAG and QBE, which report later this week.

A rebound in earnings, a share buyback and a special dividend helped Suncorp to a pandemic-era high. The insurer increased full-year cash earnings 42.1 per cent to $1.064 billion and raised its net profit 13.1 per cent to $1.033 billion.

The company declared an eight cent special dividend and said it will buy back up to $250 million of its shares on-market. The share price jumped 7.84 per cent to its strongest level since February 2020.

Rivals IAG and QBE rose 4.61 per cent and 3.21 per cent, respectively.

Westpac rallied 0.96 per cent after announcing the sale of its life insurance business to Japanese insurer TAL Dai-ichi Life Australia for $900 million. The sale is the latest in a series of divestments as the bank moves towards a leaner business model.

A bounce in lending rates lifted the rest of the banks. The yield on ten-year Australian government bonds rose almost four basis points. CBA advanced 1.15 per cent to a seven-week high. ANZ added 1.37 per cent and NAB 0.86 per cent. Macquarie Group firmed 0.61 per cent.

Aurizon advanced 1.72 per cent to its highest level since December despite flat full-year earnings and profit. Statutory net profit was steady at $607 million. Group earnings eased 1 per cent to $903 million amid a drop in coal tonnages due to Covid and Chinese restrictions on imports.

Telstra edged up 0.53 per cent on news the telco will expand its move into digital healthcare by acquiring GP management software firm MedicalDirector for $350 million. The announcement follows news Telstra will take a majority stake in global healthcare firm PowerHealth. The share price shrugged off late news the ACCC had launched an action against the company alleging breaches of consumer law in NBN plans.

A 3.2 per cent increase in operating earnings and a profit of $618.3 million helped lift Charter Hall Long WALE real estate investment trust 2.81 per cent.

Beyond the financial space, the pick of the heavyweights were Aristocrat Leisure +0.19 per cent and Goodman +0.6 per cent.

Vulcan Energy rallied 2.19 per cent on news the lithium miner will apply to list on the Frankfurt Stock Exchange, in addition to its ASX listing. The company said dual listing will increase its international profile and open up new investment avenues.

Doghouse

Miners were the biggest drag on the index as share prices played catch-up with recent weakness in iron ore, base metals and gold. Westpac senior economist Justin Smirk warned last month’s action added to signs of a cyclical peak in demand.

“July was a very mixed month for commodities but, overall, we believe we are seeing signs consistent with nearing a cycle top,” Mr Smirk said. “While there remains some near term upside risks overall we expect prices to find a peak in 2021 and to then start correcting through 2022.”

Iron ore miner Fortescue Metals gave up 1.26 per cent, Rio Tinto 1.38 per cent and BHP 0.79 per cent.

Toll road operator Transurban declared a statutory full-year profit of $3.272 billion, thanks in large part to the sale of a stake in its US assets. A 7 per cent decline in traffic was largely offset by contributions from new toll roads. The share price eased 1.96 per cent.

“Since the end of the financial year we have seen restrictions reimposed in Sydney, Melbourne and Brisbane, impacting traffic across all three regions,” Chief Executive Officer Scott Charlton warned.

Aged care provider Regis slid 5.71 per cent after identifying up to $40 million in underpayments to staff. The company said employee entitlements under enterprise agreements had been entered inaccurately into the payroll system.

A 50 per cent collapse in demand for bricks during a lockdown pause in construction in Sydney forced Brickworks to halt production at two of its five NSW kilns. The company said it had temporarily reduced staffing at various facilities but had “no intention of laying off any staff”. The share price dropped 1.51 per cent.

News Corp slumped 7.95 per cent, reversing Friday’s earnings-fuelled surge after overseas investors proved harder to impress. The media giant’s US listing dropped 0.52 per cent on Friday night.

Other markets

Oil added to last week’s heavy losses. Brent crude fell US$1.35 or 1.9 per cent to US$69.35 a barrel.

The Asia Dow put on 0.44 per cent, China’s Shanghai Composite 1.22 per cent and Hong Kong’s Hang Seng 0.72 per cent. Trade in Japan was suspended for a public holiday.

The dollar rallied 0.3 per cent to 73.57 US cents.

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