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The share market slid towards back-to-back losses for the first time in four weeks amid mixed earnings, negative US equity futures and stubbornly high Covid case numbers.

The S&P/ASX 200 fell 67 points or 0.88 per cent to a one-week low. Slim gains in defensive sectors were comprehensively outweighed by declines in banks and miners.

Commonwealth Bank and IAG were major drags as they traded without their dividends. BHP retreated ahead of tonight’s full-year earnings report. Reporting season produced more losers than winners.

What’s driving the market

The market mood has deteriorated this week as record Covid case numbers in NSW, creeping lockdowns in several parts of the country and extensions in Melbourne and the ACT underline the challenge of suppressing the delta variant. Economists are becoming increasingly convinced the Reserve Bank has under-estimated the blow to the economy.

“Lockdowns in Australia are likely to have a very acute impact on the economy, much more than what the RBA had pencilled in only a week ago,” NAB Director, Economics, Tapas Strickland, said. “While NAB still expects a sharp rebound in activity when restrictions ease, the near-term impact is likely to be larger with lockdowns extending beyond Sydney (e.g. NSW, Melbourne and ACT).

“With Sydney’s protracted lockdown looking to be extended into September and even October, a rebound in activity may not occur until the mid-to-late Q4,” he added.

New South Wales reported 452 new cases today, Victoria 24 cases and the ACT 17.

The minutes from the last RBA meeting showed the bank is betting on vaccines to reduce the need for lockdowns.

“The baseline scenario assumed that the domestic vaccine rollout would accelerate in the months ahead, reducing the frequency and severity of lockdowns and allowing the international border to be reopened gradually from mid 2022,” the minutes said.

“It also assumed that the Greater Sydney lockdown would extend through the September quarter, with some further brief and/or less severe restrictions assumed to occur in parts of Australia in the December quarter.”

Weak Chinese economic data yesterday sharpened doubts about global growth. NAB slashed its Chinese growth forecast to 8.7 per cent for the year from 9.5 per cent in the wake of the data.

US stocks finished mixed but broadly higher overnight. The Dow and S&P 500 edged up 0.31 and 0.26 per cent, respectively.

Futures action suggested growing doubts this morning. S&P 500 futures retreated nine points or 0.2 per cent.

Back home, consumer confidence recovered last week as Australians grew more resigned to Covid lockdowns. The ANZ-Roy Morgan sentiment index rose 2.5 points to 101.1 from 98.6 the previous week.

Going up

Companies reporting this week have struggled to advance in the changed climate. Domain Holdings overcame early weakness to put on 3.32 per cent as investors weighed an increasing cost base against a reinstated dividend and a 66.4 per cent surge in full-year net profit.

Earnings improved 41.9 per cent. Expenses increased 5.6 per cent and were expected to rise again “in the high single digit to low double digit range” this year.  

On the wider market, traditional havens outperformed for a second session. Gold stocks and healthcare companies were among the best performers.

Fisher & Paykel put on 2.72 per cent, ResMed 2.39 per cent, Collins Foods 2.02 per cent and Gold Road Resources 1.84 per cent. At the top end, Brambles climbed 1.09 per cent and Wesfarmers 0.05 per cent.

Going down

Commonwealth Bank dropped 3.17 per cent as it traded without the right to a dividend. Also going ex-dividend were IAG -2.95 per cent, Computershare -2.89 per cent and Mineral Resources -4.02 per cent.

Westpac indicated it will likely join rivals in returning excess capital through a share buyback. CBA, NAB and ANZ have all announced buybacks in recent weeks to pare back cash buffers constructed at the height of the pandemic against bad debts.

“Given excess capital and franking credits, the Board will consider a return of capital, with an update expected at our FY21 results,” the bank said in a quarterly update this morning.

The share price dropped 1.63 per cent as falling lending rates weighed on the banks. ANZ shed 0.87 per cent and NAB 0.97 per cent.

BHP declined 1.23 per cent ahead of this evening’s full-year earnings report. Woodside, which reports tomorrow, eased 1.7 per cent. Rio Tinto dipped 0.85 per cent. Fortescue lost 0.16 per cent.  

A dividend cut and a warning about supply-chain issues helped pull Breville down 7.84 per cent. The home appliance manufacturer will pay shareholders  a final dividend of 26.5 cents per share, down from 41 cents this time last year, despite record sales of $1.2 billion. The company said supply-chain disruptions “drove a restricted inventory position at the tail end of 2H21”.

Santos dipped 1.69 per cent to its lowest level of the year despite lifting full-year underlying profit 50 per cent to US$317 million and hoicking its dividend 162 per cent to 5.5 cents per share. The company maintained sales and production guidance for this year.

Acquisitive property manager Dexus lifted full-year net profit 17 per cent to $1.138 billion. The company expanded funds under management to $25 billion, partly through joint ventures and acquisitions. Investors will receive a distribution of 51.8 cents, 3 per cent more than last year. The share price dipped 0.98 per cent.

Shopping Centres Australasia receded 0.19 per cent from an eight-month high despite property revaluations helping lift full-year net profit 441.4 per cent to $462.9 million.

Among other companies reporting, Magellan dived 9.55 per cent, Sims 1.76 per cent, ARB Corp 0.35 per cent and Sezzle 5.84 per cent.

Other markets

A generally downbeat session on Asian markets saw the Asia Dow retreat 0.37 per cent, China’s Shanghai Composite 0.05 per cent and Hong Kong’s Hang Seng 0.31 per cent. Japan’s Nikkei rose 0.17 per cent.

Oil mounted a tentative rebound from last night’s losses. Brent crude rallied 17 US cents or 0.24 per cent to US$69.68 a barrel.

Gold trimmed US$1.60 or 0.1 per cent off last night’s 0.7 per cent advance, trading at US$1,788.20 an ounce.

The dollar extended its fall to 0.42 per cent at 73.08 US cents.

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