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A wobbly start to the week saw the share market dip as a breakout in the dollar sapped companies with significant overseas operations.

The S&P/ASX 200 fell almost 20 points before regaining its footing. The index was last down three points or 0.05 per cent.

What’s driving the market

Strengthening commodity prices helped mining stocks weather the surging dollar. Iron ore producers BHP, Rio Tinto and Fortescue Metals rallied. CSL, Aristocrat Leisure and Brambles, which all generate significant earnings in other currencies, fell 1.5 per cent.

On Friday, copper hit a nine-year high and the dollar broke out to its highest level in almost three years. The Aussie climbed 0.2 per cent this morning to 78.98 US cents.

“The standout feature of Friday’s markets was the surge in the AUD, breaking clean above its prior 0.7564 – 0.7820 year-to-date range to end the week at 0.7877,” NAB Head of FX Strategy Ray Attrill said. “Bond yields continued their upward ascent, globally and in real terms on rising H2 2021 economic optimism, which looks to be starting to spook the US equity market somewhat, though sector rotation into smaller cap and cyclical stock was the bigger story Friday. Metals prices remain on a tear, led by a 4.4% rise for copper, bringing its weekly rise to 7.7%.”

Tentative gains in US futures helped offset a soft end to last week on Wall Street. On Friday, the S&P 500 eased 0.19 per cent amid persistent worries about rising inflation. This morning, S&P 500 futures climbed eight points or 0.2 per cent.  

The last week of the domestic interim earnings season brought well-received results from Costa Group, Bluescope Steel and NIB, as well as fizzers from Ampol and Lendlease.

Going up

The ill winds battering North America blew Macquarie Group plenty of good. Less than two weeks after its last forecast, the investment bank lifted its full-year earnings outlook by 5 – 10 per cent, citing short-term US demand for gas and power. A bitterly cold snap has caused power shortages and blackouts across the US. The share price jumped 3.9 per cent.

The heavyweight ore producers kept the market near break-even as iron ore hovered above US$170 a tonne. Fortescue Metals gained 3.6 per cent, BHP 3.2 per cent and Rio Tint 3.5 per cent. Copper-gold miner Sandfire jumped 9.1 per cent following drilling success in New Zealand. Elsewhere at the top end of the market, Transurban gained 0.5 per cent and Afterpay less than 0.1 per cent.

Costa Group jumped 12.5 per cent to a 21-month high after more than doubling profits. The fruit and veg wholesaler increased its full-year net profit after tax by 108.4 per cent to $59.4 million. The result was helped by the end of the drought and strong citrus prices.  

An uncertain outlook helped limit Bluescope Steel to a gain of 0.3 per cent despite a 78 per cent rebound in half-year net profit to $330.3 million. The steelmaker warned there was doubt whether above-average spot steel spreads would continue.

A 15.9 per cent hike in half-year profit lifted heath insurer NIB 7.8 per cent.

Going down

The surging dollar hit companies with significant earnings in other currencies. Logistics specialist Brambles, pokie-maker Aristocrat and biotech CSL all fell 1.5 per cent.

Bond surrogates continued to feel the heat from rising US yields. Wesfarmers slipped 2 per cent, Coles 1.3 per cent and Woolworths 1.1 per cent.

A downbeat session for the banks saw CBA dip 0.7 per cent, ANZ 0.6 per cent, NAB 1.8 per cent and Westpac 1.6 per cent.

Ampol skidded 3.1 per cent to a four-month low after slumping to a $485 million full-year net loss. The rebranded Caltex suffered a horror year as Covid lockdowns cruelled fuel demand and disrupted energy markets.

A 26 per cent decline in half-year core operating profit saw Lendlease fall 0.4 per cent. The developer said it has a Covid-delayed construction backlog worth $14.5 billion in revenue and a development pipeline of $110 billion.  

Takeover target Bingo Industries faded 1.7 per cent. The waste manager cut its interim dividend to 1.5 cents per share from 2.2 cents last year after Covid helped slash its half-year underlying net profit by 41.2 per cent to $16.7 million.

Kiwi infrastructure firm Chorus sank 3.5 per cent after reporting a drop in half-year net profit to $24 million from $31 million in HY20. A cloudy outlook helped drag shares in Reliance Worldwide down 4 per cent despite a 13 per cent bump in net sales and a 33 per cent increase in interim dividend.

Other markets

The Asia Dow rose 0.81 per cent. China’s Shanghai Composite edged up 0.02 per cent, Hong Kong’s Hang Seng 0.78 per cent and Japan’s Nikkei 1.25 per cent.

Oil extended Friday’s decline as the weather improved in the US, allowing refineries and other infrastructure to reopen. Brent crude dropped 20 cents or 0.3 per cent to $US62.70 a barrel.

Gold started the week on the front foot, bouncing $8.10 or 0.5 per cent to $US1,785.50 an ounce.

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