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Investors locked in profits from a strong week after caution set in on Wall Street ahead of tonight’s US inflation update.

The S&P/ASX 200 fell 34 points or 0.46 per cent by mid-session. The decline trimmed the benchmark’s gain for the week to just over 100 points.

Nine of eleven sectors retreated. Gains in Wesfarmers, Rio Tinto and the supermarkets helped offset falls in Afterpay, Woodside and CSL. Fortescue Metals sank after the miner announced Elizabeth Gaines will stand down as CEO.

What’s driving the market

Financial markets turned risk-averse overnight after Chinese property giant Evergrande was branded a defaulter and as investors took some money off the table ahead of an inflation report that might push the Federal Reserve towards tightening monetary policy faster. European markets fell for a second night as rising omicron case numbers raised the prospect more nations will follow the UK by tightening restrictions.

“With Omicron cases doubling every few days, the UK has imposed major new restrictions to curb the fast-spreading COVID-19 variant,” Kalkine Group CEO Kunal Sawhney said.

“While these new restrictions have emerged as a sign of growing concerns over the Omicron variant, it remains to be seen if other countries in Europe will follow suit. At present, tighter travel rules are being implemented in most of the European countries to curb the circulation of the contagious variant.”

In the US, the S&P 500 and Nasdaq Composite finished at session lows. The S&P 500 shed 0.72 per cent, the Nasdaq 1.71 per cent. The Dow closed flat.

“Investors are now cautiously waiting for the upcoming inflation data, which could influence the central bank’s decision on when to taper economic stimulus. Increasing inflation has already prompted the Fed to accelerate the pace of reducing bond purchases, which have helped retain interest rates at record-low levels,” Kalkine’s Sawhney said.

Attention this morning pivoted to Asia after ratings agency Fitch declared China’s second largest property developer was in default. Evergrande missed a deadline to make repayments on two coupons due last month. Fitch placed the developer in its ‘Restricted Default’ category, meaning it had defaulted but not collapsed.  

Hong Kong’s Hang Seng fell 0.6 per cent as Evergrande shares dropped 1.11 per cent. The Asia Dow lost 0.41 per cent, Japan’s Nikkei 0.54 per cent and China’s Shanghai Composite 0.48 per cent.

Going up

The defensive utilities was the only sector to record an advance of any consequence. The sector rose 0.75 per cent as AGL Energy added 1.2 per cent, APA Group 0.83 per cent and Origin Energy 0.89 per cent.

The morning’s best performers were miner Iluka Resources +6.61 per cent, health insurer NIB +4.14 per cent and fund manager Perpetual +3.29 per cent.

The heavyweight banks and miners traded mixed. CBA gained 0.14 per cent, Rio Tinto 1.05 per cent and BHP 0.02 per cent. ANZ eased 0.62 per cent and NAB 0.28 per cent.

Westpac shed 0.71 per cent after extending a share buyback to take advantage of its depressed stock price. The bank said the rationale for the $3.5 billion buyback had been made “more compelling” by recent declines.

Wesfarmers gained 0.86 per cent and Brambles 0.38 per cent. Supermarkets Coles and Woolworths put on 0.31 and 0.2 per cent, respectively.

Grange Resources surged 19.67 per cent on news the Tasmanian iron ore producer will pay a special dividend of 10 cents per share. The special dividend is in addition to four cents per share in dividends already distributed this year.

Investment manager Pendal Group bounced 0.09 per cent off a 14-month low after warning of continuing pressure on institutional fund flows. CEO Nick Good told today’s AGM the company was strengthening its sales, marketing and client service teams to better support clients in Europe.

Going down

Fortescue Metals slid 0.14 per cent on news CEO Elizabeth Gaines will step down. Gaines will continue as a non-executive director and as the company’s “global green hydrogen brand ambassador”. She will also assist in identifying her successor.

Other heavyweight drags included Afterpay -4.21 per cent, CSL -1.84 per cent and Woodside -1.17 per cent.

Vulcan Energy dipped 0.63 per cent after acquiring a geothermal renewable energy power plant in Germany. The Gina Rinehart-backed lithium miner will pay 31.5 million Euros ($49.8 million) for the plant in the Upper Rhine Valley. The purchase will be funded from a $200 million capital raising in September.

Bapcor eased 0.3 per cent after refinancing its debt facilities. The share price crumbled to a 16-month low earlier this week following a boardroom bust-up between the board and retiring CEO Darryl Abotomey.

Other markets

US futures were mixed but broadly steady. S&P 500 futures inched up three points or 0.05 per cent. Dow futures dipped 16 points or 0.04 per cent.

Oil declined for a second session. Brent crude gave up 26 US cents or 0.35 per cent at US$74.16 a barrel.

Gold bounced US$1.90 or 0.1 per cent to US$1,778.60 an ounce.

The dollar was steady at 71.47 US cents.

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