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Shares fell for a second day as downbeat economic data underlined cost of living pressures ahead of an expected rate rise this afternoon.  

A broad sell-off drove the S&P/ASX 200 down 63 points or 0.88 per cent by mid-session.

All eleven sectors declined. Tech firms, property stocks and BNPL providers were among the biggest drags.

What’s driving the market

Traders reduced their exposure amid uncertainty about the scale of today’s rate hike. The Reserve Bank met this morning and was due to release the new cash rate and a policy statement at 2.30 pm AEST.

While a narrow majority of economists expect the central bank to increase the cash rate target by the standard 25 basis points, inflationary pressures could prompt a larger increase of up to 50 basis points.

“The risk of greater front loading of the hike cycle is clear given upside risks to the inflation outlook and the US Fed, RBNZ and BoC have all moved by 50bp increments recently. Markets are evenly split with 33bps priced, indicating a 50% chance of either a 25bp or 40bp move. Economists are also split with 15 out of 29 backing 25bps, 11 backing 40bps, and 3 backing 50bps,” NAB’s economics team wrote.

Reports this morning underlined the impact of rising prices on both consumers and businesses. The ANZ-Roy Morgan consumer confidence index fell 4.1 per cent last week to its lowest since mid-August 2020. Roy Morgan’s business confidence measure dived 9.1 points to a level last seen in October 2020.

“Consumers are especially pessimistic about the current economic outlook and their current financial circumstances. Confidence dropped a similar amount for both consumers paying off their home loan as well as for those who own their home,” ANZ’s head of Australian economics, David Plank, said.

The survey showed a third of Australians expect to be worse off financially this time next year, the highest percentage since the early days of the pandemic. Just eight per cent of Australians expect “good times” for the economy over the next 12 months.

US stocks rose overnight, but finished near session lows as rising yields dampened buying interest. The Dow slashed a 300+ point rally to just 16 points or 0.05 per cent. The S&P 500 gained 0.31 per cent.

Going up

Miners provided some of the morning’s advances. Sandfire Resources firmed 4.77 per cent. Lynas Rare Earths added 1.39 per cent. At the heavyweight end, Rio Tinto added 0.35 per cent and BHP 0.04 per cent.

Mining services provider Perenti jumped 14.75 per cent after winning a contract worth $520 million and announcing a share buyback. Perenti will perform underground development and production works at Evolution Mining’s Cowal project in NSW. The firm will also buy back up to 10 per cent of shares on issue on-market.

Fund manager Magellan bounced 1.89 per cent off yesterday’s eight-year low. Janus Henderson put on 2.34 per cent. Other notable rises included Inghams +1.96 per cent and Ampol +1.85 per cent.

Travel stocks appeared to catch an up-draft from China reopening. Corporate Travel Management rose 1 per cent, Qantas 0.94 per cent and Flight Centre 0.73 per cent.

Going down

Buy now, pay later players sank after Apple launched its own offering, called Apple Pay Later. The service will be built into Apple Pay and come with iOS 16.

Zip Co skidded 10.46 per cent. Splitit shed 8 per cent, Hum 4.94 per cent and Afterpay parent Block 2.16 per cent.

Rate-sensitive tech stocks retreated ahead of today’s RBA announcement. Megaport dropped 5.08 per cent, WiseTech 3.72 per cent and Codan 3.63 per cent.

A tax refund helped shield Telix Pharmaceuticals against broader market pressure on growth stocks. The biopharma received a $17.25 million refund under a federal research and development incentive scheme. Shares in the firm dipped 1.2 per cent.

At the pointy end, toll road operator Transurban declined 2.31 per cent. Retail conglomerate Wesfarmers gave up 1.77 per cent. The big four banks shed between 0.6 and 2 per cent.

Growth in funds under management lifted GQG Partners before a late morning fade. The boutique asset manager increased FUM by 4.6 per cent to US$94.6 billion last month. The share price was lately down 1.22 per cent.

Other markets

A mixed session on Asian markets saw the Asia Dow lose 0.61 per cent. Hong Kong’s Hang Seng shed 0.29 per cent. China’s Shanghai Composite inched up 0.06 per cent. Japan’s Nikkei added 0.45 per cent.

US futures deteriorated late morning. S&P 500 futures were recently down 23.5 points or 0.57 per cent.

Oil rallied back above US$120 a barrel. Brent crude climbed 77 US cents or 0.6 per cent to US$120.26 a barrel.

Gold eased for a third session, down US$1.80 or 0.1 per cent to US$1,841.90 an ounce.

The dollar continued to lose ground, falling 0.28 per cent to 71.66 US cents.

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