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Aussie shares fell for a third day as early gains evaporated ahead of tonight’s US rates decision.

The market rolled over after rebounding as much as 51 points in early trade. By mid-session the S&P/ASX 200 was down five points or 0.06 per cent.

Gains in energy and banking stocks helped offset declines in growth and consumer companies.

What’s driving the market

Two days of gains on Wall Street encouraged investors to dip their toes at the open after yesterday’s rates surprise. The ASX 200 fell 0.42 per cent yesterday after the RBA raised the cash rate target by a larger-than-expected 25 basis points.

US stocks edged higher overnight as a huge week of central bank action continued. The S&P 500 firmed 0.48 per cent as the Federal Reserve began a two-day policy meeting.

“Speculations are rife that the Fed could accelerate its measures to fight against elevated inflation and embrace its biggest interest rate hike since 2000 tonight. The financial market is broadly anticipating a 50-basis point hike in the federal funds rate at the conclusion of the FOMC meeting,” Kunal Sawhney, chief executive of research group Kalkine, said.

US futures rallied this morning in a further hint investors believe tonight’s rise has been priced in. S&P 500 futures climbed 11 points or 0.25 per cent.

Back home, trade turned cautious as investors prepared for a changed environment after years of low rates. Kalkine’s Sawhney said Australians should be rotating into companies with strong records of dividend payouts.

“In a rising interest rate environment, it seems imperative for investors to invest in sectors that could better survive the aggressive policy moves of the central bank,” he said. “To evade potential losses, investors can look for companies that have a good track record of consistent dividend payouts and are well poised to weather higher interest rates.

“The financial sector tends to perform better when the cash rate rises as the interest margin of financials expands and create more profit. Much like financials, insurance companies generally flourish in a rising interest rate environment, which allows them to earn greater returns on the premium income they amass from policyholders.

“Interest rate hikes might affect REITs while harming real estate demand, which can potentially seep into the returns obtained by funds that invest in property.”

The REIT sector has fallen sharply this week, easing another 0.85 per cent this morning. The financial sector rallied for the first time in three days.

Going up

Energy was the pick of the sectors amid scepticism over the European Union’s ability to function without Russian gas and crude. Santos gained 1.07 per cent. Woodside Petroleum put on 0.55 per cent and Beach Energy 1.85 per cent.

Transurban climbed 1.41 per cent to a ten-month high after reporting a strong pick-up in traffic volumes. Other heavyweights to advance included Macquarie Group +1.55 per cent, NAB +0.87 per cent and CSL +0.62 per cent.

ANZ firmed 0.62 per cent after reporting a 3 per cent dip in half-year cash profit. Shareholders will receive an interim dividend of 72 cents per share, fully franked.

CEO Shayne Elliott said the bank had invested in a new retail banking platform and built a new retail foreign exchange offering for release later this year. Costs were flat despite inflationary pressures.

Media giants Nine Entertainment and Seven West Media suffered mixed fortunes after upgrading their earnings outlooks. Nine bounced 0.97 per cent on news it expects full-year earnings growth of more than 22 per cent.

Seven West declined 4.96 per cent after raising its forecast to $335-$340 million from previous guidance of $315-$325 million.

Going down

JB Hi-Fi fell 4.25 per cent after Covid issues prevented it from issuing full-year guidance. The retailer reported an 11.9 per cent increase in third-quarter sales at its Australian business but said disruption to stock availability and local and global uncertainties meant it was not “appropriate” to provide guidance.

Flight Centre slid 5.81 per cent after forecasting a full-year loss of $195-$225 million. The travel agent said there had been a strong turnaround over the last five months, but margins were tracking below pre-Covid levels.

Zip Co shed 9.52 per cent ahead of the release of millions of shares from voluntary escrow. A poorly-received trading update dragged automotive parts business ARB Corporation down 11.05 per cent.

Aerial mapping group Nearmap faded 2.48 per cent after telling the Macquarie Australia Conference it expects annual contract value to hit the upper end of guidance of $150-$160 million.

AVZ Minerals wilted 8.59 per cent after its flagship Manono lithium and tin project in the Democratic Republic of the Congo moved a step closer to production. The Minister of Mines signed a decree awarding AVZ’s joint venture the licence for the project. The next stage is for the Cadastre Minier, which reports to the Minister, to officially award the licence.

Online furniture retailer Temple & Webster fell 8.33 per cent after refining its full-year earnings forecast to the middle of the previously-issued guidance and announcing plans to take on Bunnings in the home improvement space.

Bank of Queensland dropped 1.91 per cent as its shares traded without the right to the latest dividend.

Other markets

A downbeat session on Asian markets saw the Asia Dow drop 0.15 per cent and Hong Kong’s Hang Seng lose 0.86 per cent. Trade in mainland China and Japan was suspended for public holidays.

Oil clawed back some of last night’s 2.4 per cent setback. Brent crude rallied 90 US cents or 0.86 per cent to US$105.87 a barrel.

Gold reversed overnight gains, falling US$8.40 or 0.45 per cent to US$1,862.20 an ounce.

The dollar firmed above 71 US cents, rising 0.17 per cent to 71.12 US cents.

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