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Dip-buyers took advantage of early weakness to lift the share market more than 30 points off its low following negative leads from Wall Street.   

The S&P/ASX 200 slashed a 44-point opening fall to just nine points or 0.13 per cent at the halfway mark.

A sharp retreat in tech stocks and more modest falls in defensive assets were cushioned by gains in most of the major miners and banks. Commonwealth Bank dragged after reporting a contraction in lending margins.

What’s driving the market

A rare burst of independence has seen the domestic market largely ignore four straight losing nights on Wall Street. The S&P 500 shed 0.42 per cent overnight as traders reduced their exposure ahead of tonight’s nervously-anticipated July inflation report. Traders fear a “hot” result could tip the balance in favour of significantly higher rates in the months ahead.

“The selling over the last few days can be seen as profit-booking by short-term investors ahead of Wednesday’s crucial inflation data, which could wipe out the entire market recovery seen in the previous month. Bond yields also rallied,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Core inflation in the US is yet to peak and is expected to rise for a few more months as house rent and wages continuously increase amid a surge in employment… Right now, Wall Street indices lack direction as investors are unable to assess how aggressively the Fed will hike interest rates and its impact on corporate profits and the economy,” he added.

The ASX 200 dropped as low as 6986 this morning before buyers pounced, raising the benchmark to 7021 by mid-session. Gains in three of the big four high-street banks and most of the resource heavyweights accounted for much of the reversal.

Tech stocks slid after weak outlooks from chip makers Micron and Nvidia pointed to faltering consumer demand. The Nasdaq Composite dropped 1.19 per cent.

“Chipmaker Micron plunged nearly 4% after the company warned that it might fall short of its June forecast because of weakening demand. Other chipmakers like Nvidia also fell by a similar magnitude following Micron’s warning,” Sawhney said.

Going up

A profit upgrade lifted GrainCorp 6.22 per cent. Expectations for a bumper winter crop prompted the agribusiness to raise its FY22 underlying net profit outlook to $365-$400 million from previous guidance of $310-$370 million. Underlying earnings were expected to be $680-$700 million, up from guidance of $590-$670 million.

“We expect another well above average ECA [east coast Australian] crop in 2022/23 based on crop development we have seen to date, and a favourable 3-month rainfall outlook,” Managing Director and CEO Robert Spurway said.

A progress update from a clinical trial helped raise Imugene 11.11 per cent. The firm said the first patient in cohort 3 of a Phase 1 trial of its cancer treatment had been dosed.

Mayne Pharma jumped 5.88 per cent after securing $679 million for its Metrics Contract Services business. The firm said the divestment strengthened the balance sheet and unlocked value for shareholders.

Three of the big four banks rallied. ANZ bounced 2.8 per cent. NAB gained 1.33 per cent. Westpac rose 1.12 per cent. Other heavyweight advances included Coles +0.51 per cent, Fortescue Metals +0.42 per cent and Rio Tinto +0.16 per cent.

Going down

Commonwealth Bank declined 0.73 per cent as investors weighed a contraction in margins against improvements in other metrics. Full-year net profit climbed 9 per cent to $9.673 billion as core business volumes expanded and the bank reduced provisions made during the pandemic for bad loans. Operating expenses declined 1.5 per cent.

Net interest margins shrank 18 basis points due to an increase in “low yielding liquid assets and lower home loan margins”. The bank expects margins to recover this year as interest rates rise. Shareholders will receive a fully-franked final dividend of $2.10 per share, slightly below expectations.

A2 Milk slumped 8.41 per cent after a setback in its bid to crack the US market. The US regulator deferred the dairy group’s request to import infant milk formula products. Similar letters were sent to other applicants.  

Computershare retreated 5.15 per cent as shareholders focussed on the negatives from a mixed full-year report. Management earnings per share increased by 10.6 per cent, allowing the board to increase the final dividend by 30 per cent. Transaction revenues weakened and US Mortgage Services disappointed.  

A costs warning helped pull gold miner St Barbara down 9.71 per cent. The company raised its production costs guidance for FY23 by 13.6 per cent, citing rising energy, labour and consumables costs.

CSL fell 1.47 per cent after completing the acquisition of Swiss giant Vifor Pharma.

Last night’s tech-led sell-off in the US helped drag Block down 5.55 per cent, Xero 3.27 per cent and EML Payments 3.02 per cent.

Other markets

A dour morning on Asian markets saw the Asia Dow lose 0.62 per cent, China’s Shanghai Composite 0.41 per cent, Hong Kong’s Hang Seng 1.6 per cent and Japan’s Nikkei 0.76 per cent.

US futures faded late morning. S&P 500 futures were recently off four points or 0.1 per cent.

Gold eased US$1.90 or 0.1 per cent from last night’s six-week high to US$1,810.40 an ounce.

Oil traded little changed. Brent crude dipped two US cents or 0.02 per cent to US$96.29 a barrel.

The dollar bounced 0.1 per cent to 69.62 US cents.

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