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Weak US leads and a cost blowout at Woolworths helped drive the share market lower.

The S&P/ASX 200 dropped 20 points or 0.27 per cent towards its third loss in four sessions.

Gains in defensive and mining stocks were outweighed by declines in energy, tech and consumer stocks. A profit warning from Woolworths dragged on supermarkets. Afterpay fell after shareholders backed a takeover by US giant Block (formerly known as Square).

What’s driving the market

US and European markets retreated as omicron worries re-emerged and as investors anticipated tomorrow night’s US monetary policy update from the Federal Open Market Committee (FOMC).

“Investors continue to be concerned about the impact of the omicron variant, upcoming key central bank meetings and equity market valuations. The US FOMC meet later this week and are expected to adopt a hawkish tone. Bond yields fell ahead of this meeting in the US,” CBA’s economics team wrote.

The S&P 500 fell 0.91 per cent from Friday’s record close. The pan-European Stoxx 600 eased 0.43 per cent. Britain’s FTSE 100 shed 0.83 per cent after Prime Minister Boris Johnson warned of a “tidal wave” of omicron cases sweeping the nation.

Affecting domestic sentiment was a surge in Covid cases in NSW to their highest since lockdown ended. The state reported 804 new cases, up from 536 cases on Monday.

Today’s tally was the highest since October 2. Daily case numbers fell as low as 135 last month before the emergence of the omicron variant. The state has recorded 64 cases of the new strain.

The consumer staples sector was the biggest drag on the market after Woolworths reported a blowout in Covid-related costs. The supermarket chain said first-half earnings would take a $150 million hit from direct Covid costs, plus an additional $60-$70 million in higher operating costs due to disruptions at stores and distribution centres.

First-half earnings were expected to be $1.19-$1.22 billion, down from $1.312 billion in the same period in FY21.

Group CEO, Brad Banducci, said: “The first half of F22 has been one of the most challenging halves we have experienced in recent memory due to the far-reaching impacts of the COVID Delta strain and its impact on our end-to-end stock flow and operating rhythm.”

Shares in the company dived 8.28 per cent to a near six-month low. Rival Coles sank 3.53 per cent. IGA operator Metcash overcame initial weakness to rise 0.56 per cent.

Going up

Nearmap climbed 5.44 per cent on news its US business will soon overtake income from Australia and New Zealand. The aerial mapping firm expects annualised contract value in North America to surpass its ANZ portfolio by year-end.

“This historical milestone for Nearmap follows the very positive momentum we’re seeing in our business in North America,” CEO and Managing Director Dr Rob Newman said.

Virtus Health soared 30.71 per cent following an unsolicited takeover offer from a US private-equity firm. Shares in the IVF specialist hit $7 after BGH Capital offered $7.10 cash per share. Virtus said its board was assessing the conditional, non-binding offer.

Polynovo bounced 12.13 per cent off a pandemic-era low on news of a turnaround in trade. The medical devices manufacturer generated record sales in the US last month and in July.  

Charter Hall Group climbed 4.84 per cent to a new all-time high in the wake of yesterday’s earnings upgrade. The morning’s other outperformers were vitamins company Blackmores +5.17 per cent, tech firm WiseTech +3.3 per cent and fruit and veg retailer Costa Group +3.17 per cent.

Among the heavyweights, Goodman Group firmed 2.15 per cent, Fortescue Metals 0.95 per cent and Telstra 0.86 per cent.

Trade in CSL was halted ahead of what is expected to be confirmation the biotech will acquire Swiss giant Vifor Pharma. The company requested a trading halt “pending an announcement regarding a potential material acquisition and associated capital raising”.

Going down

Afterpay shed 4.25 per cent as shareholders backed a takeover by US giant Block. The deal received overwhelming support. 99.79 per cent of proxy votes were in favour of the transaction.

The decision came after a trial of Mesoblast’s experimental treatment for Covid patients with acute respiratory distress syndrome missed its primary endpoint. Mesoblast shares later trimmed their fall to 15.59 per cent.

Travel and tourism stocks eased in the wake of negative Covid developments in the UK and NSW. Helloworld slipped 3.42 per cent, Flight Centre 2.83 per cent and Webjet 1.84 per cent. Corporate Travel Management shed 1.96 per cent and Qantas 1.11 per cent.

A broker downgrade from Goldman Sachs pushed Bapcor down 1.03 per cent.

Other markets

A red morning on Asian markets saw the Asia Dow lose 0.35 per cent, China’s Shanghai Composite 0.47 per cent, Hong Kong’s Hang Seng 0.73 per cent and Japan’s Nikkei 0.29 per cent.

US futures edged higher. S&P 500 futures firmed seven points or 0.14 per cent.

Oil extended overnight weakness. Brent crude slipped seven US cents or 0.1 per cent to US$74.32 a barrel.

Gold was broadly steady at US$1,788.20 an ounce.

The dollar eased 0.26 per cent to 71.12 US cents.

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