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A 20-month low in the heavily-weighted basic materials sector helped drag the share market down 0.9 per cent as China’s real estate woes undermined commodity prices.

The S&P/ASX 200 sank 61 points or 0.92 per cent by mid-session.

Mining and bank stocks led the retreat. Tech and select defensive corners of the market resisted the selling.

What’s driving the market

The market’s three-session winning run ended in convincing fashion as key exports tested multi-month lows. The ASX 200 briefly fell more than 1.5 per cent before paring its loss.

Iron ore prices in Singapore dropped under US$100 a tonne after Chinese banks warned of widespread mortgage defaults as a property slump accelerates. Copper, nickel, precious metals and crude oil also declined.  

Nikkei Asia this morning reported up to a third of local and regional governments faced budget pressure as income from land sales declines. Residential property sales are down by almost a quarter year on year.

Industrial metals have come under sustained pressure as headwinds gather against global growth. This has been exacerbated by China’s real estate troubles,” ANZ’s senior commodity strategist Daniel Hynes said.

“Buyers of over 230 properties in 86 cities have joined together to collectively refuse to make mortgage payments for unfinished, pre-sold units unless construction resumes. This also weighed on iron ore futures, which briefly fell below USD100/t for the first time since Dec 2021.”

Data late morning showed the Chinese economy grew a smaller-than-expected 0.4 per cent last quarter. Lockdowns nearly brought growth to a standstill from GDP expansion of 4.8 per cent in the first quarter. Economists had been anticipating a more modest slowdown in growth to 1 – 1.2 per cent.

Mining trio BHP, Rio Tinto and Fortescue Metals tested fresh 2022 lows. BHP dropped 3.65 per cent, dipping under $36 per share for the first time since mid-December. Fortescue Metals fell 5.28 per cent.  

A soft quarterly update from Rio Tinto added to headwinds. The miner’s shares slipped 2.62 per cent after it reported a drop in realised iron ore prices and downgraded its aluminium guidance.

Today’s setback followed a mixed night on Wall Street as weak bank earnings exacerbated valuation worries heading into a new reporting season. The S&P 500 cut a 2 per cent opening plunge to 0.3 per cent by the close as Federal Reserve officials downplayed the risk of interest rates rising by a full percentage point this month.

“The benchmark index made a solid recovery after Fed Governor Christopher Waller and Fed Bank of St. Louis President James Bullard said they would back a 75-basis-point hike in the next meeting after a hot inflation print for June. Meanwhile, the Nasdaq 100 index fully recovered from losses and ended almost flat with gains in tech giants like Apple Inc. and Intel Corp,” Kunal Sawhney, chief executive of research group Kalkine, said.

Going up

The market tone turned defensive once again as investors battened down for weeks of quarterly updates on both sides of the Pacific.

REITs, consumer staples and healthcare stocks were the pick of the sectors. Coles gained 1.45 per cent, Woolworths 0.61 per cent, Goodman Group 0.48 per cent and CSL 0.31 per cent.

Other healthcare stocks to buck the broader market trend included ResMed +2.19 per cent, Cochlear +1.93 per cent and Sonic +1.85 per cent.

Dan Murphy’s owner and hotel group Endeavour climbed 1.13 per cent to its highest level since the business was spun out of Woolworths last year.

An earnings upgrade helped WiseTech climb 3.98 per cent. The logistics software supplier increased its full-year earnings guidance to $310 – $320 million from a previous range of $275 – $295 million. Revenue was expected to be near the top of guidance.

Elsewhere in the tech space, Megaport firmed 2.76 per cent, Technology One 1.67 per cent and NextDC 1.27 per cent.

At the junior end of the market, positive drilling results boosted recently-listed Falcon Minerals 37.84 per cent. The gold miner reported “highly encouraging” assay results from its Ironbark East project.

Going down

A general decline across the metals spectrum dragged mining stocks lower. Nickel miner IGO shed 6.53 per cent, diversified miner Chalice 5.51 per cent and mining services provider Mineral Resources 4.84 per cent.

The departure of Managing Director and CEO Alwyn Vorster after six years at the helm helped drag BCI Minerals down 4.17 per cent.

BlueScope Steel dropped 1.49 per cent to a 52-week low. Alumina also marked a 52-week low, falling 2.3 per cent.

Pendal Group slumped 6.86 per cent after joining the growing list of investment managers revealing a sharp downturn in funds under management. The group saw outflows of $4.2 billion last quarter, which in addition to negative market movements shrank FUM to $111 billion from $124.9 billion at March 31.

A poorly-received trading update helped pull lotto operator Jumbo Interactive down 14.6 per cent. The firm’s preliminary full-year figures fell short of consensus estimates on revenue, earnings and profit.

A downbeat outlook from JPMorgan Chase weighed on the major banks. The US giant said it was increasing its reserves in preparation for a wave of bad debts as rates rise this year.

ANZ dropped 1.6 per cent, Westpac 0.9 per cent, NAB 0.8 per cent and CBA 0.77 per cent.

Other markets

US futures rebounded ahead of earnings updates tonight from Citigroup and Wells Fargo. S&P 500 futures were recently ahead 14 points or almost 0.4 per cent.

Asian markets trimmed losses after China’s GDP miss sharpened stimulus expectations. The Shanghai Composite edged up 0.1 per cent. The Asia Dow was down 0.06 per cent. Hong Kong’s Hang Seng fell 0.5 per cent. Japan’s Nikkei gained 0.57 per cent.

Oil regained the US$100 a barrel level. Brent crude climbed US$1.09 or 1.1 per cent to US$100.19 a barrel.

Gold rose off a 16-month low. The yellow metal bounced US$6.50 or 0.38 per cent to US$1,712.30 an ounce.

The dollar was little changed, up 0.02 per cent to 67.58 US cents.

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