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The share market paused for breath following a four-day rally that reclaimed all of its omicron-inspired losses.
The S&P/ASX 200 declined for the first time in five sessions. At mid-session, the benchmark was off three points or 0.04 per cent.
Gains in Afterpay, Fortescue Metals and most of the banks helped cushion declines in BHP, Rio Tinto and Wesfarmers.
What’s driving the market
The ASX beat Wall Street back to pre-omicron levels yesterday and needed clearer leads today to extend its longest winning run in four months. US and European stocks traded in opposite directions overnight as investors weighed mixed news on the omicron Covid variant.
European stocks retreated after British Prime Minister Boris Johnson tightened restrictions to slow the spread of the virus until a booster campaign gains traction. The pan-European Stoxx 600 eased 0.59 per cent amid concerns other nations might follow. Case numbers have risen significantly this week in France, Italy and Spain.
“The introduction of new restrictions in the UK are a potential taste of what is yet to come in Europe and other regions around the globe,” NAB currency strategist Rodrigo Catril said. “The UK is among the leaders in terms of booster shots with almost a third of the population triple jabbed, yet with over 51k covid infections recorded yesterday, PM Johnson has been forced to reintroduce restrictions.
“Germany’s delta wave appears to be peaking at the moment, but infections are still rising in other parts in Europe with France now the country to watch.”
Wall Street overcame early weakness after Pfizer reported its existing vaccine was effective against omicron with a third shot. The S&P 500 put on 0.31 per cent. The Dow edged up 35 points or 0.1 per cent.
Attention now switches to tomorrow night’s November inflation report in the US. A strong reading would increase pressure on the Federal Reserve to accelerate the conclusion of its asset-buying program, with rate hikes to follow next year.
“While growth and labor markets have provided reasons to be optimistic about the economy, inflation is also running hot and sits at a 30-year high,” UBS told clients. “With the omicron variant entering the picture, investors are now questioning what monetary policy will look like going forward.”
Going up
Sydney Airport climbed 2.87 per cent on news the competition watchdog will not oppose a takeover by a consortium of investment funds. The ACCC said airports are natural monopolies, so the change of ownership would not lessen competition.
The watchdog also waved through waste manager Cleanaway‘s acquisition of several landfills and transfer stations from Suez. The ACCC said the transaction was unlikely to alter the competitive dynamics in Sydney. Cleanaway shares were steady at $2.94.
OZ Minerals rose 0.45 per cent to an all-time high after offloading joint venture interests in two copper-gold projects to a subsidiary of Minotaur. Demetallica will acquire the stakes for $6.6 million up-front and up to US$8.82 million in deferred payments contingent on the outcome of feasibility studies.
Lithium hopeful Vulcan Energy jumped 15.95 per cent after signing a binding offtake agreement with Volkswagen Group. The German automotive giant will purchase a minimum of 34,000 tonnes of battery-grade lithium hydroxide when deliveries under the five-year deal start in 2026.
Brambles +1.92 per cent, Newcrest +0.89 per cent and Afterpay +0.62 per cent were the pick of the heavyweights. Fortescue Metals put on 0.5 per cent and CSL 0.2 per cent.
Going down
ANZ drifted lower following a $25 million fine from the financial regulator for failing to apply fee waivers and discounts under the bank’s Breakfree package. The bank admitted the contraventions and said it would not contest the proceeding.
ASIC Deputy Chair Sarah Court said, “ANZ’s conduct was long standing and impacted over half a million customers. These customers were entitled to receive the benefits they signed up for and in many instances paid for. This case is yet another example of a widespread system failure by a major bank impacting thousands of customers.”
The case marks the conclusion of ASIC’s investigations into matters raised by the Royal Commission into misconduct in the financial services industry. ANZ’s share price eased 0.07 per cent.
Elsewhere in the sector, Macquarie Group shed 0.19 per cent and CBA 0.1 per cent. NAB added 0.24 per cent and Westpac 0.17 per cent.
Tech companies and other growth stocks struggled as long-term interest rates rose. The yield on ten-year Australian government bonds climbed almost eight basis points. Growth stocks are particularly vulnerable to increased borrowing costs.
Redbubble shed 8.11 per cent, Z1p Co 3.59 per cent, Xero 2.86 per cent and Codan 2.79 per cent. WiseTech eased 2.03 per cent, Tyro Payments 1.71 per cent and Nearmap 1.17 per cent.
The biggest drags on the index were Transurban -1.43 per cent, BHP -0.98 per cent, Rio Tinto -0.57 per cent and Wesfarmers -0.45 per cent.
Other markets
Asian markets were mixed but mostly higher. The Asia Dow added 0.19 per cent, China’s Shanghai Composite 0.1 per cent and Hong Kong’s Hang Seng 1.14 per cent. Japan’s Nikkei dipped 0.05 per cent.
US futures drifted lower. S&P 500 futures were recently down three points or 0.06 per cent.
Oil built on two-week highs. Brent crude climbed 25 US cents or 0.3 per cent to US$76.07 a barrel.
Gold retreated US$1.10 or 0.06 per cent to US$1,784.40 an ounce.
The dollar steadied at 71.67 US cents following another strong night.
