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The share market limped towards the end of a challenging financial year with a second day of losses as banks and resource stocks declined.

The S&P/ASX 200 retreated 48 points or 0.72 per cent by mid-session.

Slender gains in traditional defensive havens were outweighed by falls in the heavily-weighted financial and materials sectors.

What’s driving the market

Flat leads from Wall Street and declines in major exports ensured a subdued end to FY22. Falls accelerated mid-morning as US equity futures retreated. S&P 500 futures were lately down seven points or 0.18 per cent after earlier dropping 0.4 per cent.

A financial year that delivered a record high for the stock market last August began to unravel with the turn of the calendar year and fell apart over the last two months. Declines since mid-April have the ASX 200 was on course for a loss of around 9 per cent for the past 12 months.

Wall Street’s main indices finished mixed overnight as the S&P 500 headed for its worst start to a year since 1970. The S&P 500 eased less than 0.1 per cent. The Dow edged up 0.27 per cent.

The S&P 500 has given back around 20 per cent since the start of the year. The Dow is on course for its worst start to a year since the Great Financial Crisis.

Here, China-facing resource stocks struggled after Beijing reaffirmed its commitment to its zero-Covid policy. Attempts to contain outbreaks this year led to the shutdown of the world’s largest seaport, exacerbating supply-chain issues that have driven up consumer prices the world over.

“Late in our session yesterday, President Xi Jinping declared Covid Zero the most ‘economic and effective’ policy for China adding that China would rather endure some temporary impact on economic development than let the virus hurt people’s safety and health,” NAB currency strategist Rodrigo Catril said.

Data this morning suggested the Chinese economy rebounded strongly as Covid restrictions eased in Shanghai and Beijing. The official composite purchasing managers’ index jumped to 54.1 this month from 48.4 in May. Readings above 50 indicate expanding activity.

The services sector PMI rose to 54.7 from 47.8 last month. Manufacturing activity rebounded less than expected to 50.2 from last month’s reading of 49.6. Economists expected a stronger recovery to 50.6.

“Today’s… numbers were encouraging to see, even if manufacturing slightly underwhelmed and expectations were for an improvement given the easing of lockdown restrictions,” Matt Simpson, senior market analyst at City Index, said.

Going up

Bond proxies – stocks offering similar safe, reliable returns – rallied as Australian yields fell to a three-week low. Collins Foods firmed 1.71 per cent, GrainCorp 1.86 per cent and Domino’s Pizza 1.22 per cent.

In the health space, Cochlear tacked on 1.56 per cent, Fisher & Paykel 1.84 per cent and CSL 0.78 per cent. Among property stocks, Goodman Group advanced 0.6 per cent, Charter Hall Long Wale 1.63 per cent and Stockland 1.23 per cent

Laboratory testing business HRL Holdings climbed 6.67 per cent after the board backed a takeover offer from industry giant ALS. The directors, which own or control 18.59 per cent of the shares on issue, said they will accept the offer in the absence of a better deal. ALS shares dipped 1.06 per cent.

Theme park operator Ardent Leisure jumped 4.44 per cent after completing the sale of its US cinema business to Dave & Buster’s Entertainment. Ardent will return $455.7 million of the proceeds to shareholders through a capital return and special dividend.

Going down

Energy was the morning’s biggest drag, paring three days of gains after Brent crude broke a three-session win run. Beach Energy eased 3.35 per cent. Woodside dipped 2.79 per cent. Santos shed 1.06 per cent.

China’s commitment to zero-Covid helped drag iron ore producers lower. Fortescue Metals dropped 2.88 per cent, BHP 1.82 per cent and Rio Tinto 1.42 per cent.

The major banks weakened as a decline in long-term borrowing costs crimped margin opportunities. CBA shed 1.53 per cent, ANZ 1.9 per cent, NAB 1.43 per cent and Westpac 1.35 per cent. Fund manager Janus Henderson fell 4.25 per cent.

A plan to buy back up to $100 million shares on-market helped limit CSR‘s fall to 0.49 per cent. Shares in the building products manufacturer have lost around a third of their value since the start of May. The company reaffirmed its full-year outlook, which runs to March 31 2023.

AGL Energy faded 0.54 per cent despite news Canadian asset manager Brookfield built a 2.56 per cent stake in the company. Brookfield was part of a consortium that pitched a takeover offer earlier this year with Atlassian co-founder Mike Cannon-Brookes.

Shares in Collection House were suspended after the struggling debt collector appointed administrators. The firm said exhaustive attempts to restructure the business and raise additional funding had failed.

Other markets

A mixed morning on Asian markets saw Chinese and Hong Kong stocks outperform. The Shanghai Composite gained 0.59 per cent. The Hang Seng index added 0.17 per cent. The Asia Dow fell 0.47 per cent. Japan’s Nikkei shed 0.94 per cent.

Oil rose for the fourth time in five sessions. Brent crude firmed 51 US cents or 0.45 per cent to US$112.96 a barrel.

Gold bounced US$4.90 or 0.27 per cent to US$1,822.40 an ounce.

The dollar recouped much of its overnight loss, bouncing 0.3 per cent to 68.99 US cents.

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