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Risk-off moves on US futures and commodity markets got the Australian trading week off to a downbeat start.

The S&P/ASX 200 retreated 38 points or 0.56 per cent by mid-session. Today’s retrace followed the benchmark’s best week since March.

Stocks declined as cautiously positive pre-market leads were superseded by reversals this morning in US equity futures, oil and iron ore.

Gains in energy producers and some banks were outweighed by losses among miners, supermarkets and tech stocks.

What’s driving the market

The outlook for a data-heavy week on global financial markets was dulled by declines in traditional gauges of risk appetite. S&P 500 futures dived 24 points or 0.6 per cent on the eve of a week that includes inflation figures and the start of a new corporate earnings season.

“With recessionary fears weighing on the markets, investors are hyper-focused on corporate earnings for greater clues about the health of corporate America and the broader U.S. economy,” Greg Bassuk, chief executive officer at AXS Investments, said.

Iron ore started the week on the back foot, falling 4.1 per cent on the Dalian Commodity Exchange. Prices have tumbled this year as a property slowdown and Covid restrictions curbed Chinese demand for steel.

On the ASX, the decline in the Small Ordinaries – another measure of risk appetite – outpaced the wider market with a drop of 1.26 per cent.

Both Wall Street and the ASX were coming off the back of strong weeks. The ASX 200 climbed 2.1 per cent, its biggest weekly advance since March. The S&P 500 put on 1.9 per cent.

“While the markets ended in solid green for the week, investors should brace for continued volatility in July, with ongoing uncertainties looming with respect to inflation, Fed policy, recession concerns, the enduring Russia-Ukraine war, all as we also move into corporate earnings season,” Bassuk said.

Going up

Energy producers shrugged off a mid-morning slump in crude. Brent crude reversed 81 US cents or 0.76 per cent to US$106.21 a barrel as an early advance stumbled.

Woodside Energy climbed 1.56 per cent. Santos inched up 0.14 per cent.

Coal miners New Hope and Whitehaven topped the index with gains of 5.14 and 3.88 per cent, respectively. A broker upgrade lifted SCA Property Group 2.65 per cent. Uranium miner Paladin added 2.42 per cent.

Commonwealth Bank was the pick of the major banks, rising 0.92 per cent as a rebound in long-term lending rates opened margin opportunities. Westpac firmed 0.35 per cent. NAB faded 0.46 per cent. ANZ lost 0.18 per cent.

Bank of Queensland rose 1.3 per cent. Insurers QBE and Suncorp added 1.78 and 1.9 per cent, respectively.

Link Administration edged up 0.5 per cent after the board told suitor Dye & Durham it would have to do better. The firm announced the directors could not support a revised takeover offer of $4.57 per share from the Canadian software company. Link also announced its full-year result was expected to be slightly above guidance.

Going down

The sudden departure of CEO and Managing Director Tom Cregan drove EML Payments down 19.53 per cent to a four-year low. The payments firm announced Emma Shand would start immediately following Cregan’s resignation. No explanation was proffered for the change.

BHP declined 2.09 per cent after the UK’s Court of Appeal cleared the way for a group action to proceed following the failure of a dam in Brazil. The group action seeks compensation for people and businesses affected by the collapse of the Samarco dam.

A broker downgrade from Credit Suisse helped drive fruit and veg grower Costa Group down 11.98 per cent to a 28-month low. Trade in the firm’s shares was paused, pending an announcement.

Gold miners were back in the firing line after Friday’s fleeting respite. The ASX sub-sector dropped 3.3 per cent to its lowest since October 2018.

De Grey Mining shed 5.66 per cent, Evolution 5.51 per cent and Newcrest 3.44 per cent.

The tech sector suffered its first significant hit this month as bond yields rallied. Novonix slumped 8.13 per cent, WiseTech 1.41 per cent and Xero 1.22 per cent.

Other markets

Asian markets mostly retreated. The Asia Dow dropped 0.55 per cent. China’s Shanghai Composite lost 1.02 per cent. Hong Kong’s Hang Seng swooned 2.18 per cent. Japan’s Nikkei 225 index gained 0.78 per cent.

Gold eased US$1.90 or 0.1 per cent to US$1,740.40 an ounce.

The dollar fell 0.23 per cent to 68.29 US cents.

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