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Australian shares fell for the first time in four sessions as traders locked in profits at a seven-month high.  

A positive week faded towards a downbeat conclusion following a mixed night on Wall Street. The S&P/ASX 200 reversed 52 points or 0.7 per cent by mid-session. The decline trimmed the benchmark’s gain for the week to 43 points or 0.6 per cent.

Gains today in gold miners, healthcare providers and supermarkets were outweighed by declines in real estate companies, energy producers and banks.

What’s driving the market

Global markets paused for breath overnight after Wednesday’s fierce rally. The S&P 500 eased less than 0.1 per cent as investors assessed economic data supporting the case for smaller interest rate hikes.

Manufacturing activity contracted for the first time in the US in two and a half years. Core inflation cooled more than expected.

Wall Street’s main indices finished mixed ahead of employment data tonight that could set the tone for the next few sessions. The Dow dropped 0.56 per cent. The Nasdaq crept up 0.13 per cent.

“After Wednesday’s big rally, Wall Street indices took a breather despite inflation and manufacturing data supporting the argument for a slowdown in rate hikes. Tonight’s employment data could provide further evidence that the Fed can go slow on rate hikes from December onwards,” Kunal Sawhney, CEO of research group Kalkine, said. 

The outlandish reaction in the US on Wednesday night to signs of a slowdown in rate hikes left the market vulnerable to a retrace, Sawhney said. The S&P 500 jumped 3.01 per cent after Fed Chair Jerome Powell indicated the central bank may opt for a smaller increase this month after four straight hikes of 75 basis points.

“Even though the Fed could go for a 50 bps this month, a hike is a hike, and it ultimately adds to the already high interest rates prevailing in the country. The last corporate earnings season was mixed, and big names like Microsoft and Apple are facing headwinds in the equity market because the market is anticipating a hit to demand,” Sawhney said.

“This means that the Fed’s relaxing of its hawkish stance might only marginally boost sentiments, with traders also looking at other data sets like the jobs market and GDP growth before doubling down on equities.”

Going up

Gold miners topped the leader board for a second day following the yellow metal’s strongest rally since April 2020. Gold jumped US$55.30 or 3.1 per cent overnight as a retreat in the US dollar continued.

“Traders know that an era of aggressive interest rate hikes is over, and only smaller rate hikes will be taking place,” Naeem Aslam, chief market analyst at AVATrade, said. “The dollar index… is primarily losing momentum, and this is pushing the price of gold higher,” he added.

St Barbara surged 11.2 per cent, Silver Lake Resources 6.25 per cent, Ramelius Resources 4.23 per cent and sector heavyweight Newcrest 3.32 per cent.  

A rebound in battery metal miners continued. Allkem firmed 2.06 per cent, Lynas Rare Earths 2.44 per cent and Nickel Industries 1.99 per cent.

The healthcare sector retested a three-month high. Healius rallied 3.77 per cent, ResMed 1.49 per cent, CSL 1.11 per cent and Sonic Healthcare 0.97 per cent.

Warrego Energy jumped 9.62 per cent to 28.5 cents as the battle for control of the gas producer hotted up. Beach Energy raised its initial offer of 20 cents per share to 25 cents. The increased bid values Warrego at $305.8 million.

The revised offer came after Gina Rhinehart’s Hancock Energy topped Beach’s proposal with an offer of 23 cents per share. Beach shares fell 1.9 per cent.

Going down

Coal companies declined after Coronado warned heavy rain in Queensland has dented production and put costs guidance at risk. The Bowen Basin miner said it would not meet production volume guidance of 16.9-17.1 million tonnes.

“The record rainfall experienced by Coronado and our peers in 2022 across the Bowen Basin has been unprecedented,” Managing Director and Chief Executive Officer Gerry Spindler said.

Shares in the miner dropped 3.35 per cent. Whitehaven Coal shed 2.68 per cent. New Hope lost 2.89 per cent.

Real estate investment trusts were the morning’s biggest drag as traders booked profits at a three-month high. The heavily-geared sector traded yesterday at levels last seen in August after the US Federal Reserve indicated it was preparing to slow the hectic current pace of interest rate increases.  

Charter Hall Group reversed 3.73 per cent, Mirvac 2.83 per cent, Goodman Group 2.99 per cent and Vicinity Centres 1.96 per cent.

Adbri fell 3.21 per cent after warning of a costs blowout as it consolidates two cement production sites into a single operation servicing WA. The firm has engaged an engineering firm to undertake an external review amid escalating construction costs and labour constraints. The company has invested $94 million in the project and estimates it would need to spend another $170-$200 million to complete.

Toll road operator Transurban dropped 0.91 per cent after reaffirming full-year distribution guidance of 53 cents per stapled security. Holders will receive an unfranked half-year distribution of 26.5 cents per security.  

Atlas Arteria fell 0.93 per cent after completing the acquisition of a two-thirds stake in the Chicago Skyway toll road. The company recently raised $3.098 billion to fund the purchase.

Domino’s Pizza dropped 1.13 per cent after raising $150 million from investors to take complete ownership of its German joint venture.

Other markets

Most Asian markets retreated. The Asia Dow gave up 0.84 per cent, China’s Shanghai Composite 0.15 per cent and Japan’s Nikkei 1.73 per cent. Hong Kong’s Hang Seng improved 0.26 per cent.

US futures continued to lose ground. S&P 500 futures faded 11 points or 0.27 per cent.

Oil rallied ahead of this weekend’s OPEC+ meeting. Brent crude firmed 21 US cents or 0.24 per cent to US$87.09 a barrel.

Gold trimmed last night’s 3.1 per cent charge. The yellow metal dipped US$1.80 or 0.1 per cent to US$1,813.40 an ounce.

The dollar eased 0.13 per cent to 68.01 US cents.

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