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The share market ended a wild week near where it started despite recording its biggest rise and biggest fall since 2020 inside three sessions.

The S&P/ASX 200 bounced 95 points or 1.29 per cent today to end the first week of 2022 with a weekly gain of 8.7 points or around 0.1 per cent.  

All 11 sectors rebounded as the market reversed almost half of yesterday’s fall. Energy companies, banks and property stocks led the recovery. Wesfarmers rallied after Woolworths dropped out of the bidding war for Australian Pharmaceutical Industries.

What moved the market

Neck braces will become essential wear if the ASX continues to whiplash the way it did over the opening week of the new year.

The ASX 200 welcomed 2022 with its strongest rally since November 2020. Two sessions later, a violent reversal unwound all of those gains after the US Federal Reserve reminded investors the year ahead will be harder for equities without the tailwinds of emergency rate settings and stimulatory monetary policy. The minutes from the December policy meeting showed the US central bank gearing up to raise rates and reduce its balance sheet.

The response on equity markets was dramatic. The Nasdaq Composite spiralled to its worst loss since February 2021. The ASX 200 went further, plunging  207.5 points or 2.74 per cent. The fall was the index’s largest single-session points loss since the early days of the pandemic.  

The tremors subsided on Wall Street overnight, although the main indices still closed modestly lower. The S&P 500 was the pick of the trio with a loss of 0.1 per cent.

That was enough to bring buyers back to the ASX. Today’s recovery was as broad as yesterday’s selling. The financial sector finished near the top as one of the sectors most likely to benefit from higher rates, according to Kalkine Group CEO Kunal Sawhney.

“The financial sector… usually experiences high profit margins as rates climb,” he said. “An increase in interest rates helps banks to charge more from borrowers while paying less to depositors.

“Investors can also ponder on investing in consumer discretionary sector, which observes improved demand as rates rise. The rising rate environment is believed to be a state of healthy economy, which could include increased consumer spending on non-essential and luxury goods.

“Meanwhile, investors can think about investing in the companies having a track record of consistent dividend payouts ahead of interest rate hikes. The aim should be to favour companies that gain from the economic health dividend suggested by rising interest rates.”

The spotlight in the US will swing tonight from the rates outlook to the strength of the labour market. The December nonfarm payrolls report is expected to show the latest Covid wave had limited effect on employment. A report on Wednesday showed the private sector added 807,000 jobs.

“All eyes are now glued to the December jobs report due tonight, which is expected to reveal significant gains in employment last month following a disappointing November report,” Mr Sawhney said.

Winners’ circle

Wesfarmers rose 0.65 per cent after resuming pole position in the contest for Australian Pharmaceutical Industries (API). Rival Woolworths announced it was walking away from its non-binding proposal to acquire the pharmacy wholesaler and retailer following due diligence.

“Woolworths Group has advised API that it has withdrawn its proposal as it has not been able to validate the financial returns it requires in line with the Group’s capital allocation framework,” the company said.

API said a Scheme Implementation Deed with Wesfarmers remained in place and was due to complete this quarter. The firm’s shares declined 12.43 per cent from close to Woolworths’ $1.75 per share offer price to $1.51.50, nearer Wesfarmers’ bid of $1.55. Shares in Woolworths dropped 0.19 per cent.

Some of yesterday’s worst performers were amongst today’s best. Real estate investment trusts bounced off a one-month low. Unibail-Rodamco-Westfield rallied 5.84 per cent, Goodman Group 1.61 per cent and Vicinity Centres 2.64 per cent.

In the tech space, WiseTech recouped 3.44 per cent, EML Payments 3.56 per cent and Afterpay 2.99 per cent.

Fortescue Metals was the pick of the big three bulk metal producers, rising 3.14 per cent. Rio Tinto added 2.39 per cent and BHP 2.46 per cent.

Energy giant Woodside gained 2.21 per cent, Santos 2.88 per cent and Beach Energy 2.77 per cent.

A strong session for insurers saw Medibank Private gain 5.88 per cent, IAG 2.29 per cent, Suncorp 2.47 per cent and NIB 3.73 per cent.

The financial sector reversed almost all of yesterday’s sell-off. Commonwealth Bank put on 2.68 per cent, ANZ 2.6 per cent, Westpac 1.26 per cent and NAB 1.55 per cent.

Doghouse

James Hardie dived 4.13 per cent after the fiber cement supplier punted CEO James Truong following complaints about workplace behaviour. The board concluded after due diligence that Mr Truong’s conduct breached the company’s code of conduct. Harold Wiens will act as interim CEO.

Investment manager Pinnacle added to yesterday’s 13.14 per cent plunge after reporting it will receive $18 million in performance fees for the last half. The firm expects a net return on first-half investments of $2 million. The share price declined 1.17 per cent.

Magellan eased 5.44 per cent on news of further fund outflows last quarter in addition to the loss of a major mandate from the UK’s St James’s Place. The investment manager saw net outflows of $1.552 billion. The firm expects performance fees of $11 million for the first half.

Other markets

A rebound session on Asian markets saw the Asia Dow rise 0.54 per cent, China’s Shanghai Composite 0.35 per cent and Hong Kong’s Hang Seng 1.15 per cent. Japan’s Nikkei faded to a loss of 0.27 per cent.

US futures moved higher. S&P 500 futures were recently up 10 points or 0.21 per cent.

Oil rose for a fifth session. Brent crude climbed 59 US cents or 0.7 per cent to US$82.58 a barrel.

Gold bounced US$2.90 or 0.16 per cent to US$1,792.10 an ounce.

A rebound in the dollar faded by the Australian market close, leaving the Aussie 0.02 per cent weaker at 71.61 US cents.

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