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The share market slumped towards a third weekly loss as a US market holiday, reports of a new Covid variant and a reversal in iron ore prices prompted a sell-off.

The S&P/ASX 200 retreated 89 points or 1.2 per cent by mid-session. The decline pushed the benchmark more than 80 points into the red for the week. A close at these levels would be the lowest in six weeks.

All 11 sectors and every one of the market’s 20 largest companies declined. Travel and tourism stocks wilted as authorities assessed a Covid variant emerging in South Africa.

What’s driving the market

sharp declines on Asian markets and in US equity futures quickly superseded positive overnight leads. US futures turned firmly lower amid concern about a new virus strain.

S&P 500 futures slipped 23 points or almost 0.5 per cent. Dow futures shed 229 points or 0.65 per cent.

“Rising virus cases are raising the prospect of further lockdowns in Europe going into the Christmas holiday season, which might open a new can of worms for the stock market.,” Kalkine Group CEO Kunal Sawhney said. 

The new variant has a high number of mutations and has reportedly spread swiftly in South Africa’s most populous province. Britain’s health secretary said the variant “may be more transmissible” than existing variants and existing vaccines “may be less effective”.

Asian markets accelerated losses as the morning wore on. The Asia Dow sank 1.41 per cent, China’s Shanghai Composite 0.46 per cent, Hong Kong’s Hang Seng 1.73 per cent and Japan’s Nikkei 2.2 per cent.

Here, travel and tourism stocks copped the worst of the selling. Flight Centre gave up 6.32 per cent, Webjet 4.61 per cent, Corporate Travel Management 4.2 per cent and Qantas 4.91 per cent.

Overnight, European stocks broke out of their lockdown malaise, rising for the first time in five sessions. The pan-European Stoxx 600 put on 0.42 per cent. Markets have struggled in the face of tightening restrictions to contain a fourth wave of Covid-19.

Investors will give thanks that the US Thanksgiving holiday is finally in the rear-view mirror. Wall Street closed overnight and will only reopen tonight for a thinly-traded half-session. The disruption has cast a long cloud. Without the main engine of the global financial system firing, markets have lost momentum this week.

The ASX 200 has traded in a different direction each session. Hopes for an early Santa rally, similar to last year, have been dashed. Last November was the best month of the pandemic bull market. The benchmark jumped nearly 10 per cent, assisted by US election euphoria. This morning’s setback meant November has so far delivered a loss of around 0.1 per cent.

“The Australian share market observed heightened volatility this week, with the benchmark index moving in and out of gains. The equity market was primarily baffled by rising bond yields and volatile oil prices following a coordinated move by major energy-consuming nations to tap their strategic crude reserves,” Kalkine’s Sawhney said. 

The morning’s only major economic release showed retail sales ripped higher as lockdown ended. Retail turnover increased a seasonally-adjusted 4.9 per cent last month, accelerating from September’s 1.3 per cent advance.

Going up

Winners were scarce as the session soured. The morning’s best gains were CSR +1.51 per cent, James Hardie +1.38 per cent and Ansell + 1.32 per cent.

A 33 per cent jump in home loans lodged over the first three months of the financial year helped lift Australian Finance Group 9.36 per cent. October was a record month for the mortgage broker, with a 36 per cent increase in loans lodged to a record $388 million.

EML Payments coasted up another 0.55 per cent following news yesterday that Ireland’s regulator had cleared the way for the company to expand its offering.  

Pinnacle Investments bounced 0.67 per cent after raising $105 million to invest in private-equity firm Five V Capital. Harvey Norman firmed 0.59 per cent following Wednesday’s trading update.

Going down

A week-long rally in iron ore miners soured after one of China’s main steel hubs reimposed production curbs to contain pollution ahead of the Winter Olympics. The news snuffed out hopes normal output could resume after steel mills met previous targets. Spot ore prices dropped 3.2 per cent yesterday.

Fortescue Metals fell 3.13 per cent, Rio Tinto 2.53 per cent and BHP 2.02 per cent. Other major drags included Macquarie Group -2.19 per cent, CSL -1.31 per cent and Afterpay -0.85 per cent.

ANZ eased 0.4 per cent following trouble with the regulator. The Australian Securities and Investments Commission (ASIC) launched Federal Court proceedings against the bank alleging breaches of the Credit Act in relation to a home loan “introducer program”. ANZ said it had cooperated with the regulator and established a remediation program for affected customers.

Commonwealth Bank shed 0.55 per cent, NAB 2.12 per cent and Westpac 2.31 per cent.

AMP sagged 3.59 per cent after declaring it will write down $325 million as it cleans up the books ahead of a demerger of AMP Capital. The investment manager will recognise charges related to deferred tax assets, the write-down of intangibles, lease contracts and other impairments in its full-year result. The impairments will not impact underlying profit.

A ratings downgrade from Macquarie helped drive Appen down 15.29 per cent. The broker cut its advice to ‘Underperform’ from ‘Neutral’, citing the possibility of an earnings downgrade.

Kogan sank 5.3 per cent to a fresh 18-month low in the wake of yesterday’s second strike against the board of directors.

Other markets

Oil tanked under the threat of a demand hit from any new Covid restrictions. Brent crude fell 91 US cents or 1.12 per cent to US$80.01 a barrel.

Gold attracted haven buying, rising US$7.30 or 0.41 per cent to US$1,791.70 an ounce.

Fading risk appetite helped drive the dollar down 0.13 per cent to 71.63 US cents.

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