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The share market marked time ahead of risk events in the US as gains in growth and defensive stocks were largely offset by declines in heavyweight banks and iron ore producers.

The S&P/ASX 200 traded both sides of break-even before reaching mid-session six points or less than 0.1 per cent in the red.

Tech stocks, gold miners and real estate trusts rose. CBA and Bank of Queensland declined after market updates. Uranium stocks surged after several European countries asked the EU to recognise nuclear power as green energy.

What’s driving the market

Buying interest was kept in check by a third straight decline on Wall Street. The S&P 500 eased 0.24 per cent overnight as investors continued to reduce exposure ahead of several potential market-moving events.

All eyes will be on tonight’s US September consumer prices update, the minutes from the last Federal Reserve meeting and the launch of a new corporate earnings season.

“Investors are concerned over the impact of inflationary pressures and supply chain problems on the companies’ earnings,” Kalkine Group CEO Kunal Sawhney said. “Investors fear that the third-quarter earnings season will not be as robust as the second quarter, when companies reaped the rewards of pent-up demand and surge in commodity prices.”

“Speculations are rife that the impending inflation data will exceed market expectations amid the surge in commodity prices and aggravating labour and supply shortages last month. This may prompt the Fed to taper its massive bond-buying program as soon as next month,” he added.

“The ghost of stagflation is haunting the American economy. There are robust signs that show inflation is here to stay, and the labour market has slowed sharply in the US. This might give rise to stagflation, which could imperil the country’s fragile recovery from the pandemic.”

US futures remained underwater this morning despite news a bill authorising a short-term increase in the federal government debt ceiling passed in the House, clearing the way for President Joe Biden to sign it into law. S&P 500 futures dropped nine points or 0.2 per cent.

Back home, a retreat in long-term interest rates from a six-month high pricked interest in equity alternatives to bonds, but undercut lenders. The yield on ten-year Australian government bonds dipped more than four basis points to 1.692 per cent.

Consumer sentiment waned this month but remained positive in the face of lockdowns. The Westpac-MI index dipped 1.5 per cent to 104.6 from a September reading of 106.2.

Job advertising increased 6 per cent last month as vacancies in NSW jumped 20.6 per cent ahead of reopening. Advertising in Victoria declined 2.6 per cent.

Going up

Growth stocks and bond surrogates were back in favour as bond yields retreated. Afterpay climbed 2.38 per cent, Goodman Group 2.02 per cent, Coles 1.28 per cent and Transurban 0.74 per cent. Newcrest gained 1.25 per cent after gold broke a three-session losing run.

Uranium stocks provided much of the morning’s excitement. Stock prices took off after ten EU countries asked the European Union to recognise nuclear power as green energy. The Global X Uranium exchanged traded fund (URA) jumped 11.65 per cent in the US to its highest in almost four weeks.

Here, Paladin Energy soared 24.49 per cent, Deep Yellow 21.98 per cent and Bannerman Energy 27.87 per cent. GTI Resources gained 25 per cent, Alligator Energy 19.67 per cent and Peninsula Energy 21.74 per cent.

Signs of a turnaround in the Chinese infant formula market lit a fire under Bubs Australia and A2 Milk. Bubs jumped 28.47 per cent after reporting gross revenue almost doubled to $18.5 million last quarter. The firm’s China-facing business saw revenue increase 98 per cent quarter on quarter. A2 Milk, which also services the Chinese market, climbed 9.14 per cent.

Star Entertainment rose for the first time in three sessions after defending its anti-money laundering procedures. The casino group said it had adopted all of the recommendations made by auditor KPMG following a review in 2018. Shares that plunged more than 20 per cent on Monday bounced 5.76 per cent.

Health insurer nib rose 0.44 per cent on news of a new partnership with ING’s Australian banking subsidiary. The deal will allow ING Bank Australia to sell customers health insurance underwritten by nib under the ING Health brand.

Going down

A warning about pressure on margins helped pull Bank of Queensland down 4.73 per cent. The bank reported a 221 per cent jump in full-year statutory net profit to $369 million. Cash earnings improved 83 per cent to $412 million. The share price fell after the bank said it expects net interest margins to decline five-seven basis points this financial year “as competition continues and the low interest rate environment remains”.

Fund manager Challenger increased assets under management by 3 per cent last quarter to $113 billion. Funds under management increased 2 per cent following $1.4 billion in net flows. Shares eased 0.47 per cent.

Commonwealth Bank dropped 0.97 per cent during a virtual AGM that shed little light on the bank’s prospects. CEO Matt Comyn said housing activity remained strong, but the bank was monitoring the market and was prepared to “adjust our lending settings appropriately”. He praised the government for stimulating the economy during lockdown.

ANZ shed 0.86 per cent, NAB 0.04 per cent and Westpac 1.21 per cent.

A sharp reversal in iron ore weighed on producers. Spot prices yesterday unwound almost half of a 16 per cent surge since the end of the Golden Week holiday in China. Rio Tinto fell 1.85 per cent and Fortescue Metals 2.2 per cent. BHP edged up 0.13 per cent.

Pact Group retreated 15.12 per cent after abandoning plans to sell its contract manufacturing business and warning of weak Q1 demand. The packaging group said “market uncertainty and supply chain disruption arising from COVID-19” meant expectations for the sale of the contract business had not been met. First-quarter trading in the company’s core businesses was “resilient”, but contract manufacturing was weaker than expected as increased costs dented margins.

Other markets

A downbeat session on Asian markets saw the Asia Dow lose 0.2 per cent. China’s Shanghai Composite 0.1 per cent, Hong Kong’s Hang Seng 1.43 per cent and Japan’s Nikkei 0.19 per cent.

Brent crude eased 19 US cents or 0.23 per cent to US$83.20 a barrel.

Gold firmed US$2 or 0.11 per cent to US$1,761.30 an ounce.

The dollar inched up 0.05 per cent to 73.36 US cents.

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