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A broad sell-off lowered Australian shares in the wake of sharp declines on Wall Street and commodity markets overnight.

The S&P/ASX 200 declined steadily to a mid-session loss of 40 points or 0.53 per cent.

All 11 sectors retreated, mirroring the breadth of US losses. Growth stocks once again copped the heaviest treatment as interest rates tested multi-year highs. Energy stocks sagged as crude dropped below US$100 a barrel.

What’s driving the market

Mildly negative pre-market futures proved over-optimistic as investors reduced their exposure ahead of a US inflation report tonight that is expected to intensify pressure on the Federal Reserve to hike rates.

Wall Street clearly anticipates another red-hot report: US futures continued to lose ground this morning. S&P 500 futures slid 17 points or 0.38 per cent.

Overnight, growth stocks steered the Nasdaq Composite down 2.18 per cent. The decline extended the tech-heavy index’s fall from its peak back below 17 per cent.

“Risk assets are starting to respond to the relentless rise in yields with US equities falling sharply overnight as the US 10yr yield hit 2.79%, its highest in three years. The S&P500 closed -1.7% with all sectors in the red,” NAB Director, Economics, Tapas Strickland, said.

Australian interest rates are also on the March. The ten-year Australian yield climbed seven basis points this morning to 3.89 per cent, a level last seen in 2015.

Inflationary pressures have yet to dent business conditions and confidence, according to NAB’s March survey. Business conditions jumped nine points to +18, the biggest improvement since June 2020. Profitability increased eight points to +13. Confidence improved three points to +16.

“Businesses reported very strong trading conditions and a sharp rise in profitability, which indicates demand is continuing to hold up as the economy rebounds from Omicron and growth gathers momentum,” NAB Group Chief Economist Alan Oster said.

Consumers were less confident about the outlook. The ANZ-Roy Morgan confidence index rose 1.3 per cent last week to 94.6, well below the 100-point level where optimists start to outnumber pessimists.

Going up

Havens were at a premium as the sinking tide lowered most boats. Just four companies on the ASX 20 index of market behemoths managed gains. James Hardie put on 1.48 per cent, Transurban 0.37 per cent, Macquarie Group 0.34 per cent and Rio Tinto 0.14 per cent.

Gold miners offered a sanctuary as a rally in the yellow metal entered a fourth day. Ramelius Resources rose 2.87 per cent, Regis Resources 2.84 per cent and St Barbara 2.63 per cent.  

Outside of the gold space, the ASX 200’s best performers were Uniti Group +3.32 per cent, BlueScope Steel +1.83 per cent and Elders +1.72 per cent.

Iress climbed 1.68 per cent after scrapping plans to divest its UK mortgages business. The company said valuations for the business had been impacted by market volatility and changed perceptions of the worth of tech businesses as rates rise.

Going down

Growth stocks whose valuations depend more on expectations for future earnings than current earnings once again suffered most. Novonix dived 7.85 per cent, HUB24 5.35 per cent and Imugene 5.43 per cent.

Retailer City Chic Collective fell 6.37 per cent towards a two-year low. Vitamin-maker Blackmores lost 4.29 per cent.

Energy producers declined after Brent crude settled below US$100 a barrel for the first time in almost a month. Santos shed 1.24 per cent. Woodside Petroleum dipped 0.81 per cent.

Pendal retreated 0.38 per cent after rejecting a takeover offer from rival Perpetual and launching a $100 million share buyback. The fund manager’s board said Perpetual’s non-binding offer undervalued the company and was not in the best interests of shareholders.

An on-market share buyback was the most efficient way to “deliver an earnings per share accretive return of capital”. Perpetual shares lost 0.19 per cent.

The high-street banks fell between 0.1 and 1.1 per cent. Wesfarmers dropped 0.87 per cent, CSL 0.89 per cent and Goodman 1.08 per cent.

G8 Education eased 1.84 per cent after Omicron knocked a hole in first-quarter profits. The childcare provider’s revenues, occupancy and staffing costs were all impacted by centre closures and isolation requirements. Operating profit declined to $1 million from $17 million over the same period last year.

Pilbara Minerals dipped 4.22 per cent after warning Covid issues could affect production forecasts for this quarter. First-quarter production fell within guidance at 81,431 dry metric tonnes of spodumene concentrate. The average sales price was towards the lower end of guidance.

A record quarter failed to cushion rare earths miner Lynas. The share price dropped 2.54 per cent after the company reported quarterly sales revenue of $327.7 million, more than 50 per cent higher than the prior corresponding period.  

Seven Group dropped 1.96 per cent as its shares traded without the right to a dividend.

Other markets

A red morning on Asian markets saw Asia Dow fall 0.82 per cent, China’s Shanghai Composite 0.35 per cent, Hong Kong’s Hang Seng 0.46 per cent and Japan’s Nikkei 1.33 per cent.

Brent crude bounced 87 US cents or 0.9 per cent to US$99.35 a barrel.

Gold climbed US$12.20 or 0.6 per cent to US$1,960.30 an ounce.

The dollar bounced 0.13 per cent to 74.24 US cents.

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