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Aussie shares gave up tentative early gains as the tech sector fell to a five-month low and the major miners weakened.

The S&P/ASX 200 reached mid-session 25 points or 0.34 per cent in the red. The Australian benchmark edged up 11 points in early trade before caution set in.

The dollar clambered back above 70 US cents after touching its lowest level in 13 months.

What’s driving the market

Investors appeared reluctant to put more money to work until they have better clarity on the short-term outlook. The ASX 200 has drifted steadily lower over the last four weeks, losing 0.5 per cent last week.

The emergence of a new Covid variant has done nothing to lift risk appetite. ING’s economics team expects omicron jitters to ease, but warned economic data may reflect the impact of the new variant on consumer psychology.

“Our base case is that this is more of a scare rather than a prelude to more severe economic restrictions that would derail the growth story. Nonetheless, at least in the near-term, the risks are skewed to the downside for economic activity given the potential for some consumer caution,” wrote economists James Knightley and James Smith.

The dollar crumbled more than a cent to 69.92 US cents on Friday as investors rushed to the perceived security of the greenback, a traditional haven in times of uncertainty. The Aussie rebounded 0.43 per cent this morning to 70.15 US cents.

US stocks fell after the November jobs report did little to derail expectations the Federal Reserve will accelerate the end of its asset-buying program and raise rates next year. The S&P 500 dropped 0.84 per cent.

US equity futures edged higher this morning following promising omicron news over the weekend. S&P 500 futures firmed 14 points or 0.3 per cent.

“The first study of hospital patients in South Africa was published on Saturday, pointing to the variant being ‘milder’ than prior variants and suggestive of vaccines being effective,” NAB’s Director, Economics, Tapas Strickland said.  

“Of course the usual caveats of these findings being too early to make a full assessment around severity or vaccine efficacy remain,” he added. “We should get the first lab-based efficacy analysis by Sunday, while further data out of South Africa is expected this Tuesday.”

Going up

Defensive sectors outperformed as a decline in bond yields encouraged rotation into stocks that compete with bonds for fund flows. Woolworths climbed 1.94 per cent, Coles 1.87 per cent and Wesfarmers 2.05 per cent. APA Group gained 4.19 per cent.

A Covid-fuelled shift in consumer behaviour in favour of neighbourhood shopping helped lift IGA operator Metcash 5.44 per cent. The company reported a 1.3 per cent increase in half-year revenues to $7.2 billion as Australians moved to the regions and shopped local. Underlying profit improved 13.1 per cent to $146.6 million.

“The preference for local neighbourhood shopping and shift from cities to regional areas helped our independent retail networks all deliver ‘like for like’ sales growth in the half,” CEO Jeff Adams said.

Boral climbed 2.43 per cent after offloading its North American Fly Ash business for $1 billion. The sale to Eco Material Technologies will completes a divestment program aimed at unlocking value and refocussing on the core Australian construction materials business.

Gold miners benefitted from the hunt for havens from volatility. Silver Lake Resources put on 4.71 per cent, Regis 3.42 per cent and Newcrest 1.36 per cent.

Going down

The tech sector skidded 2.5 per cent to its weakest level since the start of August. Afterpay shares shed 4.64 per cent ahead of a vote next week on whether to accept a takeover offer from US giant Square (since renamed Block). A meeting originally planned for a vote today was opened and adjourned until next Tuesday while the company awaits regulatory clearance from the Bank of Spain.

Nearmap dived 7.89 per cent in the wake of heavy selling on the Nasdaq on Friday. Appen shed 4.62 per cent, Altium 3.39 per cent and EML Payments 2.99 per cent.

News of trouble in the boardroom sent Bapcor down 3.76 per cent. The automotive aftermarket parts business said the position of retiring CEO and Managing Director Darryl Abotomey had become “untenable” and the board had elected to make his departure immediate. CFO Noel Meehan will act up until a permanent replacement is found.

Magellan dropped 3.14 per cent to a 20-month low as a dip in retail funds under management (FUM) overshadowed an increase in institutional funds. Retail FUM declined to $30.229 billion from $30.303 billion.

A profit downgrade drove Sigma Healthcare down 6.67 per cent to a pandemic-era low. The pharmacy business said it now expected underlying full-year earnings to be 10 per cent lower than FY21. The company had previously predicted growth of 5 per cent.  

CSL remained under pressure from speculation about a major acquisition. Shares in the biotech sank 1.77 per cent to a near two-month low. BHP shed 2.4 per cent and Rio Tinto 1.61 per cent.

Other markets

Most Asian markets lost ground. The Asia Dow dropped 0.76 per cent, Hong Kong’s Hang Seng 1.32 per cent and Japan’s Nikkei 0.74 per cent. China’s Shanghai Composite inched up 0.19 per cent.

Oil rallied after six straight losing weeks. Brent crude climbed US$1.41 or 2 per cent to US$71.29 a barrel.

Gold edged up US$1.60 or 0.1 per cent to US$1,785.50 an ounce.

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