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A surge in unemployment compounded early pressure on Australian shares after Wall Street broke a three-session winning run.

A 60-point decline on the S&P/ASX 200 briefly blew out to 103 points following May jobs data before shrinking to a mid-session loss of 79 points or 1.3 per cent.

The unemployment rate hit a 19-year high at 7.1 per cent last month as another 227,700 people lost work, according to seasonally-adjusted figures from the Australian Bureau of Statistics. Both numbers were worse than economists expected. The consensus was for a rise in the jobless rate from 6.2 per cent to 6.9 per cent and a decline in employment of less than half the actual result. The participation rate was the lowest since 2001. The dollar responded by retreating 0.4 per cent to 68.54 US cents.

“The ABS estimates that a combined group of around 2.3 million people – around one in five employed people – were affected by either job loss between April and May or had less hours than usual for economic reasons in May,” Bjorn Jarvis, head of labour statistics at the ABS, said. Women and young people were most affected, Mr Jarvis added.

The share market was already on the back foot after a mixed close on Wall Street and a steep decline in US futures this morning. The Dow and S&P 500 fell 0.65 per cent and 0.36 per cent, respectively, overnight, while the Nasdaq edged up 0.15 per cent. S&P 500 index futures slumped 35 points or 1.1 per cent this morning in a potential sign of further weakness tonight.

All 11 Australian sectors declined, with falls ranging from 1.7 per cent for materials and real estate to 0.3 per cent for utilities. Milk company A2M hit record levels, rising 1.8 per cent as fund managers bought in before the company replaces AMP on the S&P/ASX 50 index next week.

Shopping centre operators took a hit from the threat that higher unemployment means a slower recovery. Charter Hall Retail shed 3.8 per cent, Vicinity Centres 3.8 per cent and Scentre Group 1.7 per cent. Among retailers, Harvey Norman gave up 2.3 per cent, JB Hi-Fi 3.1 per cent and Myer 3.1 per cent.

The debt-sensitive financial sector fell 1.6 per cent. CBA shed 1.2 per cent, ANZ 1.8 per cent, NAB 1.9 per cent and Westpac 1.8 per cent. Australian Finance Group surged 15.6 per cent after competition watchdog, the ACCC, cleared the way a takeover of Connective Group to create the nation’s largest mortgage aggregator.

Splitit surged 46.2 per cent to a-seven month peak after the buy now pay later operator signed a deal to integrate its payments offering with Mastercard. Afterpay‘s record run continued with a 0.9 per cent rise to a third straight all-time high.

The mining sector faced additional headwinds from overnight declines in iron ore and crude oil. Rio Tinto and BHP slid 1.6 per cent and Woodside 0.9 per cent.

The retreat in oil continued this morning. Brent crude receded 51 cents or 1.3 per cent to $US40.20 a barrel. Gold faded $1.60 or 0.1 per cent to $US1,734 an ounce.

Asian markets ticked lower. China’s Shanghai Composite surrendered 0.2 per cent, Hong Kong’s Hang Seng 0.9 per cent and Japan’s Nikkei 1 per cent.

What’s hot today and what’s not:

Hot today: Investors in a thinly-traded Australian lithium explorer saw their shares double in value after the company secured funding from a European Commission-backed investment  fund. Infinity Lithium (ASX:INF) scored $1.35 million from the EIT InnoEnergy public-private partnership to fund a feasibility study into INF’s San Jose project in Spain. The fund will also invest up to $4 million into the construction of a pilot plant and assist INF with securing further financing.  The European Union set up the fund to help develop sustainable energy projects. INF’s share price lurched from 6 cents to 14 cents before trading lately at 11 cents.

Not today: The dire near-term outlook for airlines was underlined by an earnings update this morning from Air New Zealand (ASX:AIZ). The airline expects to report an underlying full-year loss of NZ$120 million and to write down an additional NZ$715 million due to costs associated with COVID-19. The predicted result presents a stark contrast to the NZ$350 million profit the airline anticipated before the pandemic struck. The share price sank 5.9 per cent. Qantas shares fell 3.5 per cent.   

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