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The share market fell for a second day as a rare profit setback at the nation’s largest bank weighed on the heavily-weighted financial sector.

The S&P/ASX 200 declined 41 points or 0.55 per cent towards a second straight loss.

The financial sector slumped to a six-week low after a quarterly update from Commonwealth Bank highlighted margin pressure on lenders. The sector’s substantial weighting, plus milder declines among miners, outweighed gains in other sectors.

What’s driving the market

CBA shares dived 7.06 per cent after cash profits declined 9 per cent to $2.2 billion last quarter from the average during the previous half. Margins were squeezed by competition among home lenders and ultra-low lending rates at a time when the bank’s cost of borrowing is on the rise. Profits over prior quarters benefitted from the release of provisions made for bad debts at the height of the pandemic.

ANZ sank 1.46 per cent, NAB 0.86 per cent and Westpac 1.05 per cent.

The sell-off in the banks overshadowed advances in other sectors following positive leads from the US. The S&P 500 rallied 0.39 per cent overnight to within 1 per cent of its old high.

“A surprisingly robust report on consumer spending reflected a possible pull-forward in holiday shopping by consumers to avoid empty shelves due to supply chain disruptions. The data showed how rising wages and elevated savings helped Americans sustain a solid pace of merchandise spending,” Kalkine Group CEO Kunal Sawhney said.

“Market sentiments were further boosted by the latest report from the Fed, which demonstrated a better-than-expected rebound in industrial production in October.”

Wages growth accelerated last quarter in line with expectations, according to ABS data this morning. The wage price index rose 0.6 per cent from growth of 0.4 per cent the previous quarter. The annual rate of growth increased to 2.2 per cent from 1.7 per cent.

“Pockets of wage pressure continued to build for skilled construction-related, technical and business services roles, leading to larger ad hoc rises as businesses looked to retain experienced staff and attract new staff,” the ABS’s head of price statistics, Michelle Marquardt, said.

The market has struggled to regain its August highs following a run of soft economic signals, including unexpectedly weak employment and consumer sentiment data. The ASX 200 neared the 7480 level earlier this week before falling away for the third time in three weeks.

“A few signs of economic weakening are apparent in the market, such as consumer confidence that slid below its level of a year ago for almost a year for the first time since late November 2020. It seems Aussies are becoming less confident over their personal financial situations amidst the pandemic-driven challenges. Meanwhile, weaker-than-anticipated employment data for October and growing inflation expectations appear to be undermining consumer confidence to some extent,” Mr Sawhney said.   

Going up

Uniti Group was the morning’s best performer, rising 6.61 per cent following a well-received trading update. The telecom infrastructure specialist said it was on track to beat the consensus forecast for full-year underlying earnings.

EML Payments climbed 4.27 per cent from six-month lows after reporting strong growth in profits and revenues over the first quarter. CEO Tom Cregan told today’s AGM revenues were up 29 per cent on the prior comparative period to $52.4 million. Gross profit increased by 20 per cent to $34.4 million.

Car dealership Eagers Automotive advanced 4.78 per cent on news full-year profit is expected to almost double this year. In a trading update, the company forecast underlying operating profit this calendar year will rise to $390-$395 million from $209.4 million last year.

Afterpay added 1.97 per cent as Chair Elana Rubin urged shareholders to support a takeover offer from US giant Square. Ms Rubin said Square’s proposal was an opportunity to become “part of a high-growth global company”. Shareholders will vote on the deal on December 6.

Other heavyweights to advance included Wesfarmers +0.97 per cent, CSL +0.8 per cent and Telstra +0.63 per cent.

Going down

Nufarm fell 8.57 per cent after CEO and Managing Director Greg Hunt warned of margin pressure. The crop protection specialist reported a 51 per cent rise in full-year underlying earnings on revenues of $3.2 billion.  

“Early indications from the first six weeks of FY22 are that this positive momentum should continue,” Mr Hunt said. He added, “Increasing cost of raw materials as well as global logistics and supply chain challenges, will continue to pressure margins, however we expect price increases and volume growth will provide an offset.”

United Malt eased 1.69 per cent after warning of a cost hit from importing grain into north America to offset supply issues caused by drought in Canada. The company will supplement local supply by importing malting barley from Denmark and Australia at an additional cost of $8-12 million.

Seek retreated 2.29 per cent from record levels after forecasting full-year earnings will be at the upper end of guidance. The job advertising firm also expects revenues and profit at the upper end of previously forecast ranges.

The heavyweight miners wilted as a rising greenback pressured dollar-denominated commodities. Newcrest sagged 2.38 per cent, BHP 1.26 per cent, Rio Tinto 0.5 per cent and Fortescue Metals 0.63 per cent.

Other markets

A red morning on Asian markets saw the Asia Dow shed 1.08 per cent, Hong Kong’s Hang Seng 0.46 per cent, Japan’s Nikkei 0.24 per cent and China’s Shanghai Composite 0.03 per cent.

US futures inched higher. S&P 500 futures put on two points or 0.04 per cent.

Oil unwound last night’s advance. Brent crude slid 38 US cents or 0.46 per cent to US$82.05 a barrel.

Gold recouped a portion of last night’s US$12.50 loss, rising US$2.60 or 0.14 per cent to US$1,856.70 an ounce.

The dollar extended overnight weakness, easing 0.17 per cent to 72.88 US cents.

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