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The ASX fell to its lowest level since before Christmas as soaring lending rates and energy prices dragged down growth stocks.

The S&P/ASX 200 hit 7336, its weakest since December 22, before halving its decline to 37 points or 0.5 per cent at 7372. The sell-off followed heavy falls on Wall Street as treasury yields passed pandemic-era milestones.

Seven of eleven sectors declined. The energy sector jumped more than 1 per cent after crude oil logged its strongest price since 2014.

What’s driving the market

The Australian quarterly reporting season is in full spate, but domestic newsflow was overshadowed by negative developments overseas.

US stocks tumbled overnight as the Q4 reporting season continued to disappoint. Investors dumped rate-sensitive growth stocks as bond yields adjusted to the prospect of higher rates this year as the Federal Reserve tries to rein in inflation.

The growth stock-heavy Nasdaq Composite slid 2.6 per cent to extend its decline from its peak beyond 10 per cent. The S&P 500 shed 1.84 per cent.

“The year 2022 has not been a pleasant ride for global equity markets so far, with benchmark indices in both the US and Australia falling for two weeks in a row,” Kalkine Group CEO Kunal Sawhney said. “The market sentiments have been dampened by rising concerns that the central banks could embrace rate hikes sooner than expected.

“Meanwhile, increasing bond yields have been putting pressure on stocks, prompting investors to reassess their asset allocations. At the same time, investors are cautiously evaluating the coronavirus situation and the potential impacts of the new Omicron variant.”

US futures steadied this morning, but not by enough to elevate expectations for tonight. S&P 500 futures firmed six points or 0.13 per cent.

Soaring energy prices have been a major contributor to inflationary pressures around the world. Oil hit a six-and-a-half-year high overnight and extended gains this morning following an explosion at a pipeline in Turkey. Brent crude climbed US$1.41 or 1.65 per cent to US$88.95 a barrel.

Consumer sentiment held up surprisingly well this month in the face of rising costs and Covid cases, according to Westpac’s monthly survey. The bank’s sentiment index dipped 2 per cent to 102.2 from 104.3 last month.

“This is a surprisingly solid result given the rapid spread of the omicron COVID variant over the last month,” Westpac chief economist Bill Evans said.

“The 2% decline compares to the 5.2% drop seen in the first month of the delta outbreak in NSW, a 6.1% drop heading into Victoria’s ‘second wave’ outbreak in 2020 and the epic 17.7% collapse when the pandemic first hit in early 2020.”

Going up

Energy was the best of the sectors. Santos firmed 2.48 per cent, Beach Energy 2.07 per cent and Woodside Petroleum 1.07 per cent.

Outside the energy space, the morning’s best performers were retailer Harvey Norman +4.26 per cent and UK banking group Virgin Money +3.1 per cent.

HUB24 climbed 2.94 per cent on record second-quarter net inflows. Total funds under administration grew to $68.3 billion.

Artificial intelligence chip-maker BrainChip hit a fresh high after securing a US patent for its work on neural networks. The patent is the company’s eighth since 2008. The share price has more than tripled since the start of the year and was lately up 12.9 per cent at $2.10.

Explorer Helix Resources jumped 22.22 per cent after intersecting massive copper sulphides at its Canbelego prospect in NSW. Bulletin Resources soared 26.09 per cent to a record. Newly-listed ChemX Materials rallied 15 per cent to 23 cents.

NiCo Resources hit the boards this morning with a jump of 75 per cent to 35 cents. Nickel Mines was flat after signing a memorandum of understanding to use solar power at two of its Indonesian operations.

Going down

BHP dipped 0.19 per cent after downgrading its metallurgical coal guidance as a result of wet weather and pandemic labour constraints. The miner reaffirmed its full-year guidance for iron ore, energy coal and nickel. Copper was trending towards the lower end of guidance.

Afterpay fell 1.07 per cent during its last session as an independent ASX-listed company. The BNPL leader leaves the boards at the end of the day after being acquired by US giant Block. The US tech company’s CHESS Depository Interests commence trade on the ASX tomorrow under the ticker SQ2.

Signs of a slowdown in growth helped pull interconnection services provider Megaport down 14.4 per cent to a six-month low. Monthly recurring revenue increased 7 per cent last quarter, half the growth rate through the first three months of FY22.

Other growth stocks to feel the pain included Novonix -9.11 per cent, Polynovo -4.72 per cent and WiseTech -3.4 per cent.

Record quarterly sales revenue kept Lynas Rare Earths near a decade high. The miner increased sales revenue to $202.7 million from $121.6 million in the prior quarter. The share price eased 0.72 per cent.

CIMIC dipped 0.29 per cent despite announcing its third contract win in two days. The firm’s joint venture with John Holland has been selected by the NSW Government to work on the Western Harbour Tunnel.

Other markets

A mixed morning on Asian markets saw the Asia Dow sink 1.21 per cent and Japan’s Nikkei shed 1.55 per cent. China’s Shanghai Composite put on 0.16 per cent and Hong Kong’s Hang Seng 0.4 per cent.

Gold crept up 20 US cents or 0.01 per cent to US$1,812.60 an ounce.

The dollar bounced 0.03 per cent to 71.89 US cents.

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