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The share market came close to erasing its gains for the week following soft leads from Wall Street and a bout of profit-taking at two-month highs.

The S&P/ASX 200 remained on track for a fourth week of gains despite falling 42 points or 0.6 per cent by mid-session. The index came within a point of turning negative for the week before arresting its decline.

Gains in energy producers and Telstra helped cushion losses across the wider market. Property, healthcare and tech stocks were the biggest drags.

What’s driving the market

An uncertain session on Wall Street encouraged traders to book profits following the ASX’s best day in three weeks. Shares backed off an eight-week high as some of the week’s best performers lost ground.

Overnight, peak-inflation euphoria faded in the US despite supportive data on producer prices. The S&P 500 slid to a loss of 0.07 per cent. The Dow clung on to a gain of 27 points after earlier rising more than 340 points.

“The short-term euphoria in the market following the cooler-than-expected reading on CPI [consumer prices] on Wednesday faded away as investors probably realised that a lot more needed to be done by the Fed to sustainably lower inflation. Even some Fed officials commented that the battle against inflation is far from over,” Kunal Sawhney, chief executive of research group Kalkine, said.

“The hope that the peak in inflation is in has helped the S&P 500 rally over 14% from the lows of mid-June. Technology and other beaten-down stocks have seen the strongest recovery.”

A report last night showed wholesale inflation declined in the US last month, backing the notion pricing pressures were easing after months of strong gains. However, movements on interest rate markets suggested not all traders were convinced the slowdown will affect Federal Reserve plans to keep raising interest rates.

“Ten-year yields are now 10bp higher than they were heading into the CPI data, and the interest rate market remains 50% priced for a third consecutive 75bp rate hike at the Sep FOMC. The interest rate market is clearly not drinking the same post-CPI cool-aid that the equity market has slugged on,” Tony Sycamore, market analyst at City Index, said. 

A mixed domestic reporting season continued with a well-received update from insurer IAG and a negative response to reports from ResMed, Baby Bunting and Avita Medical.

Going up

Energy was the only sector to offer a decent return, rising 1.1 per cent after Brent crude poked its head back above US$100 a barrel. The rally followed a supportive demand forecast from the International Energy Agency.

Woodside gained 1.61 per cent. Beach Energy added 1.53 per cent. Santos put on 0.28 per cent.

IAG firmed 0.76 per cent after announcing a return to profit. The insurer reported a full-year net profit of $347 million, versus a net loss of $427 million the previous year. Gross written premiums increased by 5.7 per cent.

MyDeal edged up 0.97 per cent after the competition regulator cleared the way for Woolworths to acquire the online retailer. The Australian Competition & Consumer Commission said it would not oppose the acquisition. Woolworths shares eased 0.47 per cent.  

Telstra bounced 0.76 per cent after yesterday’s trading update. NAB, Westpac and ANZ also advanced, adding 0.54-0.72 per cent.

Going down

ResMed declined 3.18 per cent as a contraction in margins took a little of the shine off a strong full-year result. The sleep treatment specialist grew revenue by 12 per cent to US$3.6 billion. Income from operations increased 11 per cent. Gross margins shrank by 90 basis points to 56.6 per cent.

Baby Bunting eased 5.04 per cent after full-year profit fell short of market expectations. The infant goods retailer reported a 14.6 per cent increase in net profit to $19.5 million. Sales grew 8.3 per cent to $507.3 million.

Skin restoration specialist Avita Medical slumped 16.08 per cent after its half-year loss blew out by 47 per cent to US$15.7 million. Operating expenses increased 12 per cent.

A week-long rally in lithium miners stuttered as traders took advantage of recent gains. Lake Resources declined 7.21 per cent. Liontown shed 3.75 per cent. Core Lithium dipped 0.17 per cent.

Growth stocks retreated as the cost of borrowing increased. The yield on ten-year Australian government bonds jumped 12 basis points to 3.42 per cent.

Telix Pharmaceutical slid 8.54 per cent, Novonix 5.81 per cent and Megaport 4.75 per cent.

Other markets

A mixed session on Asian markets saw the Asia Dow advance 0.56 per cent and Japan’s Nikkei index jump 2.36 per cent. China’s Shanghai Composite was steady. Hong Kong’s Hang Seng dipped 0.16 per cent.

US futures trimmed early gains. S&P 500 futures were recently up five points or 0.1 per cent.

Oil retreated after trading briefly above US$100 a barrel overnight. Brent crude declined 56 US cents or 0.6 per cent to US$99.04 a barrel.

Gold for December delivery slipped US$4.30 or 0.2 per cent to US$1,802.90 an ounce.

The dollar was broadly steady at 71 US cents.

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