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The share market briefly traded positive for the week before turning lower as caution prevailed at the end of a volatile run for investors.

The S&P/ASX 200 put on as much as 63 points in early action, but could not sustain the advance. A reversal in US equity futures weighed. The Australian benchmark faded to a mid-session loss of four points or 0.05 per cent.

Defensive sectors weighed as bond yields declined. Banks and commodity and industrial stocks kept the market near break-even.

What’s driving the market

The relief rally that swept Wall Street higher overnight lasted only a few hours before risk aversion returned. S&P 500 futures sank 29 points or 0.6 per cent this morning after New York reported five confirmed cases of the new omicron Covid variant. The city’s health commissioner said the cases were indicative of community spread.

The decline in futures overshadowed a strong overnight reversal in the US. The Dow bounced 618 points or 1.82 per cent. The S&P 500 put on 1.42 per cent.

“Investors were possibly snapping up bargains in the ‘buy-the-dip’ environment after the worst two-day drop in over a year, prompting a stock market rebound,” Kalkine Group CEO Kunal Sawhney said.

Global equity markets have slumped this week as investors struggled to assess the threat from the new strain. An increasingly hawkish Federal Reserve added to US headwinds.

“With rising cases of the virus, a less accommodative Fed, and tougher growth comps [comparable store sales] in the year ahead, the uncertainties around the outlook may simply be building — resulting in a more volatile environment for price discovery,” Goldman Sachs’ Chris Hussey told clients.

The ASX 200 has survived three tests of the 7200 technical support zone, but so far resisted any significant up-move. At mid-session, the index was firmly on track for a fourth straight weekly decline.  Share prices have retreated amid questions about valuations.

Veteran US investor Charlie Munger told an Australian conference this morning he believed parts of the market were wildly overvalued. Munger is Warren Buffett’s lieutenant at famed value investor Berkshire Hathaway.

“I consider this era an even crazier era than the dotcom era the one that blew up in the last 2000s,” Munger told the Sohn Conference.  

Going up

Energy stocks rallied after oil traders shrugged off a decision by the Organization of the Petroleum Exporting Countries and allies to increase production next month. The cartel had been widely expected to delay any rise until there was greater certainty about the demand impact of the omicron variant. Crude prices plunged on the news, then recovered as traders interpreted the decision as confidence in the demand outlook.

“It seems that OPEC is in no mood to take hasty decisions as the possible impact of the Omicron variant still appears unclear. Meanwhile, the group has refrained from fighting against the strategic release from the US and other significant oil consumers, leaving room for a larger-than-expected oil surplus,” Kalkine’s Sawhney said.

Oil Search firmed 1.69 per cent, Woodside Petroleum 0.24 per cent and Santos 0.72 per cent.

BHP took a step closer to centralising its operations in Australia. The board decided to unify the miner’s corporate structure under the Australian parent company by delisting in London. The company has been dual-listed since it merged with Billiton in 2001. The share price rose 1.28 per cent to its highest since mid-September.

“Unification will create one parent company, one share register and one share price globally. We believe this is the best structure for BHP to provide the resources the world needs and create long-term shareholder value,” Chair Ken MacKenzie said.

The major banks steadied after yesterday’s mixed session. NAB gained 0.87 per cent, ANZ 0.37 per cent, Westpac 0.54 per cent and CBA 0.16 per cent.

The morning’s best performers were ALS +3.05 per cent, Seven West Media +2.61 per cent and Corporate Travel Management +2.26 per cent.

Going down

CSL eased 2.28 per cent after failing to dampen media speculation it was on the verge of the largest acquisition in its listed history. Reports yesterday suggested the health giant was in talks to acquire Switzerland’s Vifor Pharma in a deal worth $10 billion. CSL said this morning it regularly assessed value-creating opportunities, but there was no certainty any transaction would proceed.  

Flight Centre dropped 1.44 per cent after Regal Funds Management named the travel agent as a target for short sellers. Regal’s chief investment officer Phil King told today’s Sohn Hearts & Minds conference Flight Centre would struggle to regain its pre-pandemic heights.

TPG Telecom slid 5.66 per cent on news founder David Teoh reduced his stake in the telco. The former board member sold 53.1 million shares through a block trade, around 3 per cent of the company’s total share capital.

Afterpay remained under the pump, falling 1.58 per cent to a four-month low. The BNPL leader yesterday announced a delay in approvals for its takeover by US giant Square.

Defensive heavyweights were also under pressure. Telstra shed 1.36 per cent, Coles 1.08 per cent and Wesfarmers 0.85 per cent.

Other markets

Asian markets soured with US futures. The Asia Dow shed 0.47 per cent, Hong Kong’s Hang Seng 1.05 per cent and Japan’s Nikkei 0.14 per cent. China’s Shanghai Composite edged up 0.1 per cent

Oil added to overnight gains. Brent crude rose 13 US cents or 0.2 per cent to US$69.80 a barrel.

Gold recouped almost a third of last night’s fall, bouncing US$6.30 or 0.36 per cent to US$1769, an ounce.

The dollar continued to lose ground, falling 0.24 per cent to 70.7 US cents.

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