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Aussie shares hit a three-week low before paring falls as two nights of dip-buying on Wall Street and a rally in US equity futures fuelled optimism that markets might be building a base.

The S&P/ASX 200 more than halved its fall to 45 points or 0.68 per cent after tumbling as much as much as 113 points in the first hour of trade. The index hit 6537, a level last seen on June 24 before recovering to 6606.

Healthcare, consumer staples and other defensive assets led the rebound. Mining stocks slumped with commodity prices. Weak Chinese growth figures released late morning kept the pressure on exporters.

What moved the market

A three-day winning run ended as further signs of economic trouble in China triggered another down-leg in commodity prices. The heavily-weighted Australian basic materials sector slumped 3.2 per cent to its lowest since November 2020.

Gross domestic product data showed the Chinese economy slowed dramatically last quarter as Shanghai and other parts of the country locked down. The economy grew an anaemic 0.4 per cent year on year, well below the 1-1.2 per cent growth expected by economists and down sharply from growth of 4.8 per cent in the first quarter.  

“The Chinese economy is in a very bad shape now,” Tianlei Huang, research fellow at the Peterson Institute for International Economics, told The Washington Post. “Consumer demand is very weak.”

Miners were already under pressure from overnight declines in iron ore, crude oil, copper, nickel and precious metals. Iron ore on the Dalian Commodity Exchange dived 8.1 per cent today as the GDP report compounded worries about the property sector. Chinese banks warned of widespread mortgage defaults as real estate prices decline.

“The problem in China is much deeper than we think, and this is a bigger risk for Australian miners. China’s troubled real estate sector is one of the biggest risks for iron ore prices and Chinese banks, which have huge exposure to the industry,” Kunal Sawhney, chief executive at research group Kalkine, said.

The dollar wilted 0.38 per cent to 67.31 US cents.

Today’s partial ASX recovery mirrored similar moves on Wall Street over the last two sessions. US stocks have finished well off intraday lows despite disappointing bank earnings and the biggest increase in consumer prices in four decades.

Overnight, the S&P 500 slashed an initial loss of more than 2 per cent to just 0.3 per cent by the close. The US benchmark has fallen all week, but remains well above last month’s bear market low.

US equity futures climbed this afternoon ahead of earnings tonight from Citigroup and Wells Fargo. S&P 500 futures were ahead seven points or 0.2 per cent at the Australian close.

Winners’ circle

The market tone turned defensive once again as investors battened down for several weeks of quarterly updates on both sides of the Pacific.

REITs, consumer staples and healthcare stocks were the pick of the sectors. Coles gained 1.77 per cent, Woolworths 0.94 per cent, CSL 1.03 per cent and Wesfarmers 0.92 per cent.

Healthcare stocks to buck the broader market trend included ResMed +1.94 per cent, Cochlear +1.67 per cent and Sonic +1.46 per cent.

Dan Murphy’s owner and hotel group Endeavour climbed 1.51 per cent to its highest level since the business was spun out of Woolworths last year.

An earnings upgrade helped WiseTech climb 3.42 per cent. The logistics software supplier increased its full-year earnings guidance to $310–$320 million from a previous range of $275–$295 million. Revenue was expected to be near the top of guidance.

Elsewhere in the tech space, Megaport firmed 1.49 per cent, Technology One 1.32 per cent and BrainChip 1.17 per cent. BNPL player Zip Co bounced 5.56 per cent.

At the junior end of the market, positive drilling results boosted recently-listed Falcon Minerals 29.73 per cent. The gold miner reported “highly encouraging” assay results from its Ironbark East project.

Doghouse

Heavyweight mining trio BHP, Rio Tinto and Fortescue Metals tested fresh 2022 lows. BHP dropped 3.48 per cent, dipping under $36 per share for the first time since mid-December. Fortescue Metals fell 6.2 per cent.  

A soft quarterly update from Rio Tinto added to headwinds. The miner’s shares slipped 2.85 per cent after it reported a drop in realised iron ore prices and downgraded its aluminium guidance.

Nickel miner IGO shed 7.14 per cent, Nickel Industries 5.79 per cent and mining services provider Mineral Resources 7.53 per cent.

The departure of Managing Director and CEO Alwyn Vorster after six years at the helm helped drag BCI Minerals down 6.25 per cent.

BlueScope Steel dropped 1.3 per cent to a 52-week low. Alumina also marked a 52-week low, falling 2.13 per cent.

Pendal Group slumped 7.84 per cent after joining the growing list of investment managers revealing a sharp downturn in funds under management. The group saw outflows of $4.2 billion last quarter, which in addition to negative market movements shrank FUM to $111 billion from $124.9 billion at March 31.

A poorly-received trading update helped pull lotto operator Jumbo Interactive down 14.99 per cent. The firm’s preliminary full-year figures fell short of consensus estimates on revenue, earnings and profit.

Other markets

Chinese stocks fell away in afternoon trade. The Shanghai Composite dropped 0.69 per cent. Hong Kong’s Hang Seng skidded 1.65 per cent.

The Asia Dow was down 0.3 per cent. Japan’s Nikkei gained 0.59 per cent.

Oil briefly regained the US$100 a barrel level before trimming its rise. Brent crude was up 80 US cents or 0.8 per cent at US$99.89 a barrel after trading as high as US$100.55.

Gold edged off a 16-month low. The yellow metal bounced US$2.40 or 0.14 per cent to US$1,708.20 an ounce.

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