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Aussie stocks retreated for the first time this week as caution set in ahead of tonight’s potentially market-moving US Federal Reserve policy announcement.

The S&P/ASX 200 fell 57 points or 0.83 per cent by mid-session as a sell-off accelerated late morning. The retreat pointed to an end to a three-session winning run, the index’s longest  in six weeks.

What’s driving the market

Slender gains in utilities, Telstra and Transurban were comprehensively outmatched by declines in miners, energy and bank stocks. BHP and Rio Tinto were the biggest of the heavyweight drags.

The sell-off accelerated as the dollar turned lower. The Aussie dropped 0.24 per cent late morning to 77.27 US cents.

The recent recovery in financial markets paused overnight ahead of a Fed meeting with the capacity to set the market tone for the near future. The US central bank has the unenviable task of acknowledging recent improvements in the economy without panicking a jittery market that has grown dependent on stimulus spending and low interest rates.

“They are definitely afraid of scaring the market. They’re afraid of disrupting the recovery,” Peter Boockvar, chief investment officer at Bleakley Advisory Group, told CNBC.

US stocks finished mixed but broadly lower overnight. The Dow shed 0.39 per cent and the S&P 500 0.16 per cent. The Nasdaq Composite eked out a gain of 0.09 per cent.

“Swings in bond yields and inflation expectations continue to drive overall market momentum,” Kalkine Group CEO Kunal Sawhney said. “Looking at the overall market charter, any occasional correction in US bond yields seems to be prompting exciting buying in growth-oriented healthcare and technology sectors that have been battered by the shooting yields. Whether the value and cyclical space continues to remain investors’ favourite depends on the Fed’s potential stance this week to stem the bond yields mania.”

Going up

Dull-but-steady telecoms and utilities were the best of the sectors. These defensive holdings are seen as a safe place to park cash in times of market uncertainty. APA added 0.8 per cent and AusNet 0.6 per cent. Telstra had a fourth straight gain within reach after advancing 0.8 per cent. Toll road operator Transurban was the only other heavyweight to rise, adding 0.4 per cent.

Fast food providers outperformed supermarkets as traders positioned for an increase in eating out as the vaccine rollout accelerates. Collins Foods, which operates the KFC, Sizzler and Taco Bell brands in Australia, gained 2.7 per cent. Domino’s Pizza climbed 1 per cent. Woolworths retreated 1.5 per cent and Coles 1.1 per cent as the ten-year yield ticked higher.

Going down

The materials sector has been a drag all week, falling for a third day despite a bounce in iron ore yesterday. BHP slid 1.8 per cent, Rio Tinto 1.7 per cent and Fortescue 0.3 per cent. Gold miner Newcrest dropped 0.6 per cent despite a two-week overnight high in the yellow metal.

Energy stocks dragged as oil traders fretted about the enduring impact of last month’s wintry blast on US inventories. Revised figures are due tonight. Woodside retreated 1.5 per cent, Oil Search 2.9 per cent and Ampol 2.1 per cent.

The big four banks eased from multi-month highs last week with bond yields, but until today had been the bedrock of this week’s gains while the miners retreated. CBA faded 0.4 per cent today, ANZ 0.8 per cent, NAB 0.7 per cent and Westpac 0.4 per cent.

News that Managing Director Jamie Pherous had reduced his stake helped pull Corporate Travel Management down from an 18-month peak. The company announced its largest shareholder sold 1.5 million shares on-market, reducing his holding from 15.2 per cent to 14.1 per cent. The share price fell 5.5 per cent.

Other moves at the top end of the market included CSL falling 0.9 per cent, Goodman Group 0.6 per cent and Brambles 0.8 per cent.

Other markets

US futures gave up early gains as most Asian markets declined. S&P 500 futures faded five points or 0.12 per cent.

The Asia Dow shed 0.36 per cent. China’s Shanghai Composite lost 0.32 per cent and Hong Kong’s Hang Seng 0.12 per cent. Japan’s Nikkei inched up 0.12 per cent.

Oil retreated for a fourth session. Brent crude fell 12 cents or 0.2 per cent to US$68.28 a barrel. Gold dipped $1.70 or 0.1 per cent to US$1,729.20 an ounce.

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