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Aussie shares declined for the fourth time in five days after the Dow logged its longest losing run since 2020.

The S&P/ASX 200 shed 74 points or 1.06 per cent by mid-session. The benchmark was stuck below the psychologically-significant 7000 technical support level at 6991 at the halfway mark.

The tech sector hit a two-year low following a torrid overnight session on the Nasdaq. Rebounds in oil, iron ore and metals cushioned the energy and materials sector from the worst of the selling.

What’s driving the market

Hopes that last month would mark a turning point in the battle against inflation were dashed overnight after US consumer prices cooled less than economists predicted. Both headline and core inflation measures came in stronger than expected. The report kept the pressure on the Federal Reserve to raise rates fast and hard.

“What traders were clearly hoping for was a decisive signal that inflation has peaked, and they didn’t get it,” City Index senior market analyst Matt Simpson said.

“Ultimately, we don’t think it changes anything; the Fed are still on track for several 50bps hikes, 75-bps is not the base-case, and this report neither makes it more or less likely 75-bps hikes will be required,” he added.

US stocks attempted a rally, but early gains gave way to the heavy selling that has typified much of this year’s action. The Dow fell 1.02 per cent to a fifth straight loss. The S&P 500 dropped 1.65 per cent, extending its retreat from record levels beyond 18 per cent. The Nasdaq Composite fell deeper into bear market territory with a fall of 3.18 per cent.

Analysts were divided on whether this year’s sell-off has further to run. Liz Ann Sonders, the influential chief investment strategist at Charles Schwab, believes much of the selling has taken place, but the elevated risk of recession could mean stock prices have further to fall.

“My net sum of where we sit right now is the market with its weakness has discounted a lot of the negativity that we’re seeing right now, certainly a lot of the slowdown in the economy,” she said.

“However, if a recession is going to befall the economy, and I think there’s a decent risk that that happens, there probably is a bit more downside to go in the market.”

The economics team at Goldman Sachs said the market had yet to put in a convincing bottom.

“With few clear signs that the recent market sell-off has bottomed, we are not yet convinced that the heavy fund outflows seen in recent weeks are behind us, though they may mean that some assets have overshot ‘fair value’,” they said.

Going up

Commonwealth Bank climbed 0.7 per cent after reporting a net profit of $2.3 billion in the first quarter. Expenses declined 2 per cent. A 3 per cent increase in volumes was offset by a 1 per cent dip in income due to margin pressure.

Orica climbed 7.59 per cent as first-half underlying earnings improved 58 per cent. The explosives firm reported a statutory net loss of $85 million, due to significant items. Underlying earnings per share increased by 94 per cent to 36.1 cents.

News of a 44 per cent bump in first-quarter earnings lifted Ampol 3.22 per cent. CEO Matt Halliday told today’s AGM that refining margins had improved 93 per cent over Q121.

Viva Energy also reported strengthening refinery margins. The actual refining margin more than doubled last month to US$26.40 per barrel from the March margin. The share price climbed 3 per cent.

AGL Energy firmed 1.22 per cent as traders looked for havens from the selling. Healius gained 1.75 per cent, Steadfast Group 1.55 per cent and Waypoint REIT 0.82 per cent.

Director share purchases spurred Polynovo to a gain of 0.89 per cent.  

Going down

The unhappy downhill ride for tech investors continued as the sector plunged 7.4 per cent to its weakest level since May 2020.

The Australian listing of Afterpay’s US parent Block dived 15.56 per cent to its lowest point since the takeover, mirroring a similar fall in the US overnight. The US listing closed at a 52-week low.

A full-year loss from Xero did little to improve the mood. The accounting software giant reported a net loss of $9.1 million as an increase in operating expenses overshadowed a modest rise in earnings. The share price slumped 11.64 per cent.

Altium slid 12.48 per cent, Megaport 9.47 per cent and Novonix 7.04 per cent.

News that half of Shanghai was Covid-free fuelled a rebound in commodity prices overnight. Iron ore bounced 5.3 per cent, Brent crude 4.9 per cent and copper 1.3 per cent.

That put a floor under the major miners and energy producers. Fortescue Metals eased 1.53 per cent, BHP 0.68 per cent and Rio Tinto 1.2 per cent. Santos shed 0.88 per cent and Woodside Petroleum 1.34 per cent.

CSR skidded 8.92 per cent in the wake of yesterday’s full-year earnings result.

CSL dipped 1.82 per cent on news of a delay in its acquisition of Swiss giant Vifor Pharma. The company said the regulatory approval process would take “a few more months”, but it remained confident of completing the acquisition.

Other markets

Asian markets were mixed but mostly lower. The Asia Dow declined 0.49 per cent. Hong Kong’s Hang Seng shed 0.69 per cent and Japan’s Nikkei 0.74 per cent. China’s Shanghai Composite inched up 0.07 per cent,

US futures continued a recent pattern of evening rallies. S&P 500 futures climbed 19 points or almost 0.5 per cent.

Gold added to overnight gains, rising US$3.60 or 0.2 per cent to US$1,857.30 an ounce.

Brent crude retreated 81 US cents or 0.75 per cent to US$106.70 a barrel.

The dollar rose 0.14 per cent to 69.36 US cents.

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