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A slide in US equity futures ahead of a new Wall Street earnings season helped drag Australian shares to a second straight loss.

The S&P/ASX 200 gave up 19 points or 0.26 per cent after earlier rising as much as 31 points.

The market mood deteriorated mid-morning as Asian markets declined and US futures hinted at further weakness tonight. Overnight, US stocks dropped 0.7 per cent.

CSL, Macquarie Group and Coles were among the winners as the high-street banks and miners closed mixed.

What moved the market

Expectations for the new US reporting season have moderated as energy prices surge and supply-chain worries mount. Analysts have cut their growth expectations to reflect a slowdown as costs rise and the delta Covid variant cuts into consumer spending.

“There are a lot of headwinds out there as we embark on corporate earnings, and traders will be looking for any and all indications of guidance — especially as the threat of slower growth looms large,” Chris Larkin, managing director of trading at E-Trade Financial, told CNBC. “As new data emerges and traders gain some potential insight into growth prospects, it may be wise to prepare for more bumps in the road.”

The new season has its unofficial start tomorrow night with a third-quarter update from JPMorgan Chase. Overnight, the S&P 500 sank 0.69 per cent amid worries about inflationary pressures. US crude hit a seven-year peak. Aluminium touched its highest since 2008. Natural gas set a 14-year peak last week.

US futures hinted at continued caution. S&P 500 futures retreated 19 points or 0.43 per cent.

Asian markets also weakened amid reports some bondholders of troubled Chinese developer Evergrande did not receive interest payments yesterday. The Asia Dow gave up 0.69 per cent, China’s Shanghai Composite 1.04 per cent, Hong Kong’s Hang Seng 1.02 per cent and Japan’s Nikkei 0.98 per cent.

While US bond markets were closed overnight for Columbus Day, Australian markets continued to sell off today. The yield on ten-year Australian government bonds hit a six-month high of 1.778 per cent this morning, before trimming its rise to 1.74 per cent. Yields have risen by around 50 basis points in less than three weeks.

Investment manager Natixis expects inflationary pressures  to drive rates for some time to come.

“We expect yields to continue to rise as monetary policy normalization continues, the recovery unfolds and inflation pressures remain unresolved. We still believe inflation to be transitory, but it is likely to remain anchored at a higher level before declining and stabilizing,” wrote the firm’s head of multi asset portfolio management, James Beaumont, and head of cross-asset investment solutions, Nuno Teixeira.

Back home, consumer confidence rose to a 13-week high ahead of the easing of lockdown restrictions in NSW. The ANZ-Roy Morgan Australian confidence index climbed 1 per cent to 105.6 last week from 104.6 the previous week. Confidence in Sydney lifted 2.5 per cent.

Business confidence also improved. The NAB gauge bounced 19 points from -6 in August to +13 last month. Unsurprisingly, NSW showed the largest increase, surging 42 points as the state government outlined the road out of lockdown.

Winners’ circle

CSL rose 1.8 per cent on news the health giant expects revenue to grow 2 – 5 per cent this year. CEO and Managing Director Paul Perreault told today’s virtual AGM net profit was expected to be around US$2.15 – US$2.25 billion, down from US$2.4 billion last financial year. Profits will be dented by the increased cost of collecting plasma in a pandemic.

“CSL is a growth company,” he said. “Although the impact of COVID on plasma collections puts FY22 behind this year’s profit number, we will continue to invest in the business and look forward to returning to the growth all of you expect from CSL.”

Newcrest edged up 0.08 per cent after the board approved feasibility studies on four growth projects. The gold and copper projects advancing from the pre-feasibility studies (PFS) stage offer an internal rate of return of at least 16 per cent and could increase the miner’s copper production by 37 per cent.

“The projections generated by the PFS studies for these projects indicate compelling rates of return and a material improvement in operating margin and cash flow,” CEO and Managing Director Sandeep Biswas said.  

Other gold miners to see gains included Perseus +4.33 per cent, Silver Lake Resources +1.29 per cent and Ramelius +2.34 per cent.

The big three ore miners finished mixed despite strong gains in ore prices. Rio Tinto retained a gain of 0.37 per cent. BHP faded to a loss of 0.26 per cent. Fortescue Metals shed 1.4 per cent. On the wider market, Aluminium miner Alumina jumped 4.19 per cent.

Other heavyweight advances included Coles +0.82 per cent, Brambles +0.69 per cent and Aristocrat Leisure +0.54 per cent.

Doghouse

Westpac eased 1.65 per cent after warning first-half profit will take a $1.3 billion hit from write-downs, divestment/transaction costs and provisions for customer refunds and legal costs. The charges will be partly offset by the sale of the bank’s general insurance business and the reversal of a write-down on the sale of its Pacific business after the PNG regulator objected to the transaction.

Commonwealth Bank announced it had completed a remedial action plan to address weaknesses in governance and culture identified by an inquiry commissioned by APRA in 2018. An independent reviewer assessed all milestones as complete and effective and all recommendations as closed.

Shares in the bank edged up 0.19 per cent. NAB gained 0.21 per cent and Macquarie Group 0.88 per cent. ANZ shed 0.71 per cent.

Telstra expects to achieve mid single-digit earnings growth this year of around $450 million, CEO Andrew Penn told today’s virtual AGM. Underlying earnings are forecast to rise to $7 – $7.3 billion from FY21 EBITDA of $6.7 billion. The company is working on stripping out fixed costs as part of its T25 strategy. The share price finished unchanged.

Star Entertainment declined for a second day in the wake of allegations that gaps in the casino group’s compliance measures were exploited by organised crime to launder money. The company disputes the allegations. The share price dropped 2.73 per cent to a 12-month low.

Other markets

Oil retreated further from last night’s multi-year peak. Brent crude declined three US cents or 0.04 per cent to US$83.62 a barrel.

Gold rose US$1.80 or 0.1 per cent to US$1,757.50 an ounce.

The dollar was steady at 73.48 US cents.

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