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The share market gave up early gains, falling for a fifth session as Asian markets declined and a tentative rebound in some of the bruised and bloodied miners faded.

At the halfway mark, the S&P/ASX 200 was down eight points or 0.1 per cent and on track to extend its worst losing run of the year.

While bargain-hunters took advantage of multi-month opening lows in Rio Tinto and Fortescue Metals, there was further pressure on BHP, Newcrest and some of the banks. Companies with strong US earnings rallied with the US dollar.

Sydney Airport, Inghams and Adairs advanced after reporting earnings. Cochlear, Stockland and St Barbara declined.

What’s driving the market

The session began brightly as value-seekers dipped their toes at the end of the domestic market’s worst week since January. With retraces few and far between this year, investors decided a 2.2 per cent decline in four sessions was deep enough for a nibble.

A 14.9 per cent collapse in iron ore prices yesterday ensured the big three producers opened at their weakest levels in months. Rio Tinto started the session at its softest price of the year before rallying 0.41 per cent. Fortescue Metals bounced 0.94 per cent. BHP fell for a fifth day, lately down 1.03 per cent.

Ore prices have collapsed this month, contracting by more than a third in five weeks as Chinese authorities rein in steel production to reduce emissions. Tax rebates have been withdrawn and production curbs introduced to ensure this year’s output does not exceed 2020. Base metal prices have also retreated sharply.

“The recent fall in commodity prices can be attributed to the fast-spreading Delta variant across countries, which has sparked economic growth concerns. In addition, a weak demand outlook for oil and other commodities amid renewed lockdowns in parts of the world seems to be keeping prices subdued,” Kalkine Group CEO Kunal Sawhney said. 

Much of the morning’s strength came from bond proxies – defensive assets seen as providing regular income streams similar to bonds when returns from the latter are weak. The yield on ten-year Australian government bonds dropped around two basis points this morning to its lowest since February.

“At a time when soaring coronavirus cases is heightening risks of market downturns, investors need to embrace a cautious approach while investing,” Kalkine’s Mr Sawhney said.

“To thrive through market volatility, investors can ponder on investing in high-quality companies with low debt, strong balance sheets and good cash flow. Moreover, investing in industries that perform well during tough economic times can also help investors wade through market weakness.”  

US stocks steadied overnight after two days of losses. The S&P 500 edged up 0.13 per cent and the Nasdaq 0.11 per cent. The Dow dropped 67 points or 0.19 per cent as buyers favoured growth stocks over cyclicals.

Going up

Bond surrogates outperformed as traders sought safe returns as global growth expectations dim under Covid restrictions. Property group Goodman climbed 2.13 per cent, Woolworths 1.73 per cent, Wesfarmers 1.09 per cent and Coles 1.35 per cent.

US-facing businesses rallied with the greenback. Aristocrat Leisure put on 2.06 per cent, CSL 0.87 per cent and Transurban 0.79 per cent.

Inghams climbed 3.2 per cent to a two-year high as strong demand for chicken helped the poultry specialist double its profit. The company declared a statutory full-year net profit of $83.3 million, up 107.7 per cent. Poultry sales grew 4.2 per cent.

A record year lifted Adairs 2.44 per cent. The linen retailer’s full-year sales increased 28.5 per cent to $499.8 million as a 33.2 bump in online sales helped offset store closures during lockdown. Sales for the first seven weeks of this financial year strengthened 5.2 per cent.

Shares in Sydney Airport edged up 0.06 per cent despite a lockdown-affected $97.4 million loss for the first six months of the year. Earnings declined 29.8 per cent from the same period last year as passenger numbers slumped 36.4 per cent.

“We were encouraged to see passenger traffic rebound strongly every time borders were open,” CEO Geoff Culbert said. “We’re optimistic that this trend will repeat itself as the vaccine program gains momentum and we see a sustained easing of restrictions,” he added.

Other companies to advance after reporting included MyState +4.09 per cent and Cleanaway +2.34 per cent. New Hope eased 2.29 per cent, St Barbara 4.22 per cent and Stockland 1.1 per cent. Smartgroup was unchanged.

The big four banks were mixed. CBA gained 0.2 per cent and ANZ 0.12 per cent. Westpac dipped 0.12 per cent and NAB 0.29 per cent.

Going down

Cochlear retreated 6.34 per cent from record levels after full-year revenue missed expectations. The hearing implant specialist achieved record sales of $1.493 billion, narrowly short of the $1.5 billion anticipated by analysts. Underlying net profit grew 54 per cent to $237 million.

TPG Telecom faded 3.48 per cent as the company looked to synergies from the merger of TPG and Vodafone Hutchison Australia to deliver over the next six months. The company hopes to save $70 million in reduced costs this year after reporting an 8 per cent decline in half-year net profit to $76 million.

While most of the mining heavyweights rose, companies further down the food chain struggled. Mineral Resources shed 3.6 per cent, OZ Minerals 4.04 per cent, Pilbara Minerals 7 per cent and Lynas Rare Earths 6.99 per cent.  

At the junior end, GWR skidded 12.5 per cent, FE Limited 14.29 per cent, Venture Minerals 15.15 per cent and Charger Metals 12.5 per cent.

Other markets

Asian markets deteriorated as the morning advanced. The Asia Dow shed 0.6 per cent, China’s Shanghai Composite 1.02 per cent, Hong Kong’s Hang Seng 1.06 per cent and Japan’s Nikkei 0.68 per cent.

S&P 500 futures wilted seven points or 0.16 per cent.

Oil pushed higher after falling for a sixth night, its worst run since the early days of the pandemic. Brent crude firmed 23 US cents or 0.35 per cent to US$66.68 a barrel.

Gold inched up US$1.70 or 0.1 per cent to US$1,784.80 an ounce.

The dollar eased 0.18 per cent to 71.33 US cents.

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