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The share market welcomed a new financial year with its first advance in three days as a rebound in property and banking stocks offset pressure on producers of raw materials.

The S&P/ASX 200 bounced 14 points or 0.21 per cent by mid-session.

Real estate investment trusts and industrial stocks led the recovery. Materials and energy were the only sectors to retreat following overnight declines in oil, iron ore and metals.

What’s driving the market

The market clawed back a portion of yesterday’s near 2 per cent slump as institutional investors reset their portfolios for a new fiscal year. An opening 56-point rally dwindled as US equity futures sank. S&P 500 futures were lately down 21 points or 0.55 per cent.

Today’s rally came in the face of weak overnight leads from the US and commodity markets. The S&P 500 wrapped up its worst first half since 1970 with a fall of 0.88 per cent. Last night’s loss extended the benchmark’s six-month decline beyond 20 per cent. For the quarter, the index lost more than 16 per cent.

“The three Wall Street indices registered their second straight quarterly loss as a confluence of factors – the Omicron variant of COVID-19, the Russia-Ukraine war, record-high inflation, and aggressive interest rate hikes from the Fed – led to a sell-off in the markets,” Kunal Sawhney, chief executive of research group Kalkine, said.

“US shares continued to bleed as economic data released yesterday did little to allay recession fears. It seems markets have already priced in a recession, but the extent of contraction in economic growth remains unknown.”

Stocks have cratered this year as surging inflation forced central banks to tighten monetary policy, slowing growth and raising the risk of recession. The ASX 200 lost 12.4 per cent for the quarter and 8.9 per cent for the month.

“If we have any words of comfort, it is that universal losses at this pace rarely take place in successive quarters, but this is not the same as saying that further losses should not be anticipated,” Michael Shaoul of Marketfield Asset Management wrote.

“This still very much looks to be the middle of the story, the period in which a previously ‘pacific’ outlook is replaced by something far stormier, and we are yet to see any signs that the weather is about to turn for the better.”

Westpac expects the Reserve Bank to raise the cash rate target by another 50 basis points next week to 1.35 per cent. The bank said a third straight increase of 50 basis points could be warranted the following month unless inflation surprises to the downside.

“An outsize print for inflation with rates still in the stimulatory zone will make a further strong case for a third increase of 50 basis points,” Westpac chief economist Bill Evans said.

Going up

The cost of long-term borrowing continued to fall, easing cost pressures on growth stocks and boosting the appeal of dividend-paying companies that compete with bonds for investment fund flows. The yield on ten-year Australian government bonds dropped ten basis points this morning, falling below 3.6 per cent for the first time in almost three weeks.

The REIT sector bounced 1.7 per cent, partly reversing declines earlier in the week as many leading trusts paid distributions. Centuria Capital firmed 4.42 per cent, HomeCo 3.99 per cent and Mirvac 3.29 per cent.

Among the market heavyweights, Goodman Group gained 2.24 per cent, Wesfarmers 1.4 per cent and Transurban 0.95 per cent. NAB firmed 1.39 per cent, ANZ 0.64 per cent and Westpac 0.41 per cent.

Regis Resources bounced 9.62 per cent on reported buying interest from billionaire Andrew Forrest. Overnight, Forrest’s Wyloo investment vehicle tried to secure an additional 15 per cent of the shares in the gold miner to add to its existing 4.9 per cent holding, according to the Australian Financial Review. The raid was abandoned after failing to reach the 15 per cent target.

Pallets business Brambles jumped 3.03 per cent after walking away from a plan to transition from wood to plastic to service US giant Costco. Bramble said costs were prohibitive and the companies were unable to agree commercial terms.

A multi-billion dollar contract with the United States Coast Guard lifted shipbuilder Austal 22.5 per cent. The Australian firm’s US subsidiary won a contract worth up to $4.35 billion to design and build up to 11 patrol boats.

Drinks and hotel group Endeavour firmed 0.2 per cent following news Agi Pfeiffer-Smith will take over as Managing Director of Dan Murphy’s. Pfeiffer-Smith is currently the group’s Chief Strategy Officer.

Going down

Growth worries kept commodity prices under pressure. Industrial metals wrapped up their worst quarter in more than a decade with further falls overnight. Iron ore’s quarterly loss passed 10 per cent.

BHP shed 1.72 per cent this morning. Rio Tinto gave up 1.73 per cent and Fortescue Metals 1.65 per cent. Coal miners New Hope and Whitehaven dropped 3.47 and 2.07 per cent, respectively.   

A 3 per cent drop in Brent crude helped pull Woodside down 2.76 per cent. Santos dipped 2.09 per cent.

Seven West Media sank 3.05 per cent after launching legal proceedings against Cricket Australia over the current rights agreement. Seven West said it was seeking to terminate the deal and claim damages for contract breaches.

Ingenia Communities Group faded 0.5 per cent on news its full-year result is expected to fall at the lower end of guidance. The seniors community developer said it had faced supply chain and labour challenges.

Other markets

US futures retreated with Asian markets. The Asia Dow fell 0.55 per cent. China’s Shanghai Composite dipped 0.17 per cent. Japan’s Nikkei shed 0.82 per cent. Trade in Hong Kong was suspended for a public holiday.

Oil steadied. Brent crude recouped 47 US cents or 0.43 per cent of last night’s loss, rising to US$109.50 a barrel.

Gold eased US$2 or 0.1 per cent to US$1,805.30 an ounce.

The dollar declined 0.34 per cent to 68.74 US cents.

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