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The share market slumped to a new 2022 low as US futures declined in the wake of last night’s late Wall Street flame-out.

The S&P/ASX 200 fell 112 points or 1.53 per cent to 7230. The decline set the index on track for its weakest close since December 2.

A broad sell-off lowered all 11 sectors. Mining stocks unwound much of yesterday’s bumper gains as the sugar hit from Chinese rate cuts wore off.

What’s driving the market

Early optimism on Wall Street overnight gave way to another sell-off overnight in a sign the mood on US equity markets has changed dramatically. The Nasdaq Composite finished 1.3 per cent lower after earlier rising more than 2 per cent. Similarly, the S&P 500 flipped a gain of 1.5 per cent into a loss of 1.1 per cent.

“We’ve shifted from buy the dip, to sell the rip,” Frank Cappelleri, executive director and technical analyst at Instinet, told MarketWatch.

“If we continue to get closes like this, it just tells us that the market isn’t ready to turn higher,” he added.

The mood continued to darken this morning after Treasury Secretary Janet Yellen told CNBC the White House and Federal Reserve would target soaring inflation this year. S&P 500 futures sank 19 points or 0.43 per cent. Rate-sensitive Nasdaq futures slid 0.8 per cent.

“Inflation rose by more than most economists, including me, expected and of course it’s our responsibility with the Fed to address that. And we will,” Yellen said.  

The Federal Reserve meets next week and is expected to lay the groundwork for a series of rate increases this year. The Reserve Bank of Australia has been more cautious in outlook, but is under pressure to end stimulus support for the economy at next month’s meeting.

“The actions of other central banks and the functioning of the bond market strongly support a cessation of the [RBA asset buying] program,” Westpac chief economist Bill Evans said.

Mining stocks outperformed yesterday after China cut lending rates. Australia’s position as a major supplier of raw materials should serve investors well in the long term as China attempts to arrest a property slump and stimulate demand.

“As China embraces monetary easing measures, the outlook for raw materials demand has improved while strengthening steel ingredient prices,” Kalkine Group CEO Kunal Sawhney said.

“A rise in raw materials demand resulting from monetary policy easing in China could rule in favour of iron ore prices, eventually benefitting iron ore exporters like Australia. Speculations are rife that Australian iron ore majors, such as Fortescue Metals Group, Rio Tinto, and BHP Group, could enjoy another strong year if the price of the commodity continues to rise.”

Going up

Winners were scarce this morning. Just four of 200 companies covered by the index advanced more than 1 per cent.

The best of the bunch were building materials supplier Boral +2.18 per cent, tech firm Appen +1.94 per cent and gold miners Northern Star +1.44 per cent and Gold Road Resources +1.16 per cent.

Vitamins manufacturer Blackmores edged up 0.96 per cent. Xero added 0.79 per cent.

At the speculative end of the market, explorer Carnavale Resources climbed 25 per cent to its highest since October 2020.

Skydiving operator xReality Group jumped 24.07 per cent on the appointment of John Diddams as chairman of the board.  

Going down

BHP moved a step closer to centralising its operations back in Australia. Shareholders backed the board’s unification resolutions at meetings in the UK and Australia. A UK court is due to consider the proposed scheme of arrangement on January 25. The change from the current dual UK-Aus listing will make the miner the ASX’s largest listed company.

Shares in the Big Australian shed 3.71 per cent as investors took profits from yesterday’s mining surge. Rio Tinto retreated 4.14 per cent. Fortescue Metals reversed 2.71 per cent.

A sharp retreat in crude prices this morning dragged Woodside down 2.71 per cent. Santos retreated 2.55 per cent.

Uranium miner Paladin gave up 9.83 per cent, nickel miner Chalice 6.26 per cent and lithium miner Allkem 7.21 per cent.

Whitehaven Coal fell 8.14 per cent after downgrading its full-year production outlook by 5 per cent. The change reflected the impact of heavy rains on the east coast.

Analytics firm Nuix fell 18.45 per cent to a new low on news first-half revenues were expected to be lower than the prior corresponding period. Pro forma earnings were anticipated to be less than half the return in 1H21.

Handed the toughest of days to debut, the newly-listed OrExplore Technologies shed half its market value. Today’s only IPO was last down 52 per cent at 12 cents.

Other markets

The mood on Asian markets was little brighter. The Asia Dow declined 1.42 per cent, China’s Shanghai Composite 0.36 per cent, Hong Kong’s Hang Seng 0.25 per cent and Japan’s Nikkei 1.55 per cent.

Oil reeled back from seven-year highs. Brent crude dived US$2.18 or 2.5 per cent to US$86.20 a barrel.

Gold also turned lower, falling US$5.30 or 0.3 per cent to US$1,837.30 an ounce.

The dollar fell back below 72 US cents, lately down 0.3 per cent at 71.95 US cents.

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