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Australian shares eased for a second day as weak overseas leads and lockdowns depressed buying interest.

The S&P/ASX 200 dipped five points or 0.07 per cent by mid-session. Declines in the banks and some of the miners outweighed gains in Wesfarmers, property giant Goodman and CSL.

Despite the setback, the index remained on track for its first weekly advance in a month, thanks to rallies on Monday and Wednesday.

What’s driving the market

The market drifted lower as lockdowns in Victoria and Greater Sydney prompted the first whispers of a double-dip recession. More than 11 million Australians – almost half the national population – were in lockdown today.

“Many good forecasters are seeing negative Sep Qtr GDP, in part due to lockdowns,” economist Stephen Koukoulas tweeted. “While Dec Qtr is some way off, slower consumer demand, weak construction, a dip in export vols, a drop in govt spending, raise risk of another weak result.”

Westpac reported its Card Tracker, which measures credit card transaction volumes, declined last week to its weakest since April, signalling a slowdown in spending.

“This week saw uncertainty over Australia’s immediate outlook increase again as Sydney’s lockdown restrictions were tightened further and extended for at least two weeks to end-July. Overnight, Melbourne was also placed into a 5-day lockdown. Unsurprisingly, the Australian dollar has lost ground, currently trading around USD0.7420 despite positive data,” Westpac Senior Economist Eliot Clarke said.

New South Wales this morning reported 97 new local cases in the 24 hours to 8pm last night. Victoria reported ten cases, four of which were announced yesterday. Queensland recorded one new local case.

“It will be interesting to see how the government and central bank’s stimulus payments will save the labour market from the impact of recent COVID-19 lockdowns,” Kalkine Group CEO Kunal Sawhney said. “The sooner lifting of lockdown restrictions and resultant return of normalcy will be crucial towards this end.

“Moreover, high hopes are attached to the ongoing vaccination programme, which if successful, will alleviate further lockdowns and pave the way for the return of foreign labour into the market.”

US futures declined following another mixed close overnight. S&P 500 slipped nine points or 0.2 per cent. Overnight, the index dropped 0.33 per cent. Weakness in growth stocks pulled the Nasdaq Composite down 0.7 per cent. The Dow inched up 0.15 per cent.

Going up

Gains in bond proxies kept the market near break-even as yields continued to fade. The yield on ten-year Australian government bonds has fallen steadily since peaking near 1.9 per cent in February. The ten-year yield eased another basis point this morning to below 1.3 per cent.

Scentre Group climbed 1.92 per cent, InvoCare 1.4 per cent, Charter Hall Group 0.92 per cent, Goodman 0.8 per cent, Wesfarmers 0.61 per cent and CSL 0.53 per cent.  

Other heavyweight gains included Macquarie Group +0.54 per cent, Fortescue Metals +0.43 per cent and BHP +0.27 per cent.

A profit upgrade lifted property group Ingenia Communities 0.85 per cent. The group said it expected full-year earnings to be 30 per cent stronger than FY2020, versus previous guidance of 15 – 20 per cent. New home settlements were up 17 per cent on FY2020.

Whitehaven Coal climbed 3.38 per cent to a 17-month peak following an upgraded price target from Citi analysts in the wake of yesterday’s quarterly report.  Medical device developer Polynovo bounced 1.9 per cent off a ten-month low.

Going down

A decline in iron ore production due to heavy rain in the Pilbara and shutdowns helped pull Rio Tinto down 0.75 per cent. The miner warned shipments would be at the lower end of guidance. Ore production on the Pilbara dropped 9 per cent last quarter from the previous quarter.

Gold miner Evolution fell 4.65 per cent after missing production guidance. The group produced 680,788 ounces of gold for the full year, 2 per cent short of a revised target of 695,000 – 710,000 issued in April. The production miss overshadowed news the company green-lit the proposed Cowal underground mine in NSW.

AMP dipped 1.35 per cent despite news ASIC was dropping a fees-for-no-service case against the wealth manager’s Financial Planning business. The company said it had amended its processes, apologised to clients and completed remediation.

Drug and device-maker Medical Developments hit a pandemic-era low after warning full-year earnings will include a non-cash charge of $7.5 – $8.5 million. The company’s respiratory business had been impacted by the pandemic, prompting an impairment against intangible assets. The share price fell 4.12 per cent.

The big four banks continued to track the decline in yields. CBA dropped 0.33 per cent, ANZ 0.47 per cent, NAB 0.48 per cent and Westpac 0.3 per cent.

Other markets

A negative morning on Asian markets saw the Asia Dow lose 0.47 per cent, China’s Shanghai Composite 0.36 per cent, Hong Kong’s Hang Seng 0.1 per cent and Japan’s Nikkei 1.14 per cent.

Oil continued to fade amid demand worries and the prospect of a new OPEC+ deal to increase output. Brent crude dipped five cents or 0.07 per cent to US$73.42 a barrel.

Gold eased $1.90 or 0.1 per cent to US$1,827.10 an ounce.

The dollar inched up 0.03 per cent to 74.25 US cents.

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