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The share market sank to a four-week low as a toxic mix of inflation and growth worries combined with higher rates to drive the major banks sharply lower.

The S&P/ASX 200 fell 67 points or 0.93 per cent by mid-session.

The heavyweight financial sector slumped 2 per cent to its lowest in 15 months. Rising energy prices lifted oil and gas producers.

What’s driving the market

Lenders fell for a third day since the Reserve Bank raised the cash rate target by 50 basis points. The nation’s largest bank, CBA, skidded 2.76 per cent to a level last seen in March.

Westpac sank 3.69 per cent, NAB 2.25 per cent and ANZ 2.07 per cent. Mortgage insurer Genworth tumbled 8.25 per cent.

Analysts fear a wave of mortgage defaults will dent profits as interest rates increase and the economy slows. CBA this morning cut its Australian growth outlook to reflect the impact of cost-of-living and rates increases. The bank cut its annual growth prediction to 3.5 per cent from a previous forecast of 4.7 per cent.

The downgrade followed reductions in expectations for global growth from the World Bank and the Organisation for Economic Co-operation and Development (OECD).

Overnight, the OECD slashed its world growth forecast to 3 per cent from 4.5 per cent and doubled its inflation forecast to almost 9 per cent. The World Bank cut its growth outlook to 2.9 per cent from 4.1 per cent and warned of looming recession in many countries.  

“The war in Ukraine, lockdowns in China, supply chain disruptions and the risk of stagflation are hammering growth. For many countries, recession will be hard to avoid,” World Bank president David Malpass said.

Inflation worries flared afresh overnight as energy prices tested three-month highs. The S&P 500 declined 1.08 per cent.

“People looking for the peak inflation narrative keep getting hit in the face every day as energy goes up,” Thomas Hayes, managing member at Great Hill Capital, said.

Going up

Energy was the only sector to offer a decent return after the international crude benchmark joined West Texas Intermediate at a three-month high. Brent oil pushed above US$124 a barrel overnight. The most active contract was lately up 38 US cents or 0.3 per cent at US$123.96.

“Brent oil is up for the eight day in the past 10 and now trades just above $124, up $10 in the past fortnight. After some indication of a likely ease in inflationary pressures, the renewed uptick in oil and energy prices is stoking concerns central banks will be forced to increase their hawkishness,” NAB currency strategist Rodrigo Catril said.

Woodside Energy climbed 1.76 per cent to a pandemic-era high. Beach Energy firmed 0.8 per cent. Santos dipped 0.06 per cent.

Crown Resorts rallied 1.92 per cent after gaming regulators in NSW and Victoria greenlit a takeover by US investment powerhouse Blackstone. Western Australia has yet to rule.

A return date for star stock picker Hamish Douglass lifted struggling fund manager Magellan 2.07 per cent. Douglass will resume as a consultant on October 1 after a period of medical leave. New CEO David George will commence three weeks early on July 19.

Going down

Aside from the banks, the heaviest drags were property giant Goodman -1.6 per cent, gold miner Newcrest -1.81 per cent and fiber cement manufacturer James Hardie -1.67 per cent.  

The index’s worst performers were Clinuvel Pharmaceuticals -6.81 per cent, Appen -7.09 per cent and Boral -6.4 per cent.

Syrah Resources sank 9.12 per cent after attacks by insurgents on other operations in Mozambique prompted the graphite miner to suspend personnel and logistics movements along a link road to its Balama mine. Mining and processing were unaffected.

Aurizon retreated 1.07 per cent from an 18-month high after the competition regulator raised concerns about a proposed acquisition of rival rail freight operator One Rail.

“By reducing the number of competitors in the supply of coal haulage in New South Wales and Queensland from three to two and removing an important competitor to Pacific National and Aurizon, we have preliminary concerns that the proposed acquisition of One Rail by Aurizon would be likely to substantially lessen competition,” ACCC Chair Gina Cass-Gottlieb said.

Cleanaway fell 3.11 per cent to a three-month low after fire broke out at a medical waste processing site. Damage to the facility in Dandenong, Victoria, was expected to reduce earnings from the waste manager’s Victorian Health Services business unit by $2 – $3 million per month.

An earnings upgrade offered Johns Lyng Group a quick lift before selling resumed. Shares in the building services provider were lately down 2.12 per cent. The firm raised its full-year revenue forecast by 8 per cent to $867 million and its earnings outlook by 5.4 per cent million to $83 million.

Other markets

A broadly downbeat Asian session saw the Asia Dow fall 0.31 per cent. China’s Shanghai Composite shed 0.52 per cent. Hong Kong’s Hang Seng dipped 0.57 per cent. Japan’s Nikkei resisted the trend, rising 0.16 per cent.

US futures added to overnight falls. S&P 500 futures declined eight points or 0.2 per cent.

Gold pared two days of gains, easing US$2.50 or 0.13 per cent to US$1,854 an ounce.

The dollar continued to lose altitude, falling 0.26 per cent to 71.67 US cents.

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