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The share market closed at its lowest in roughly a week and a half as earnings disappointments and interest rate worries sapped buyer appetite.

The S&P/ASX 200 dropped 39.8 points or 0.53 per cent to 7490. The index is on track for its first weekly loss of 2023 after falling on three of the last four sessions.

All 11 sectors finished lower. The utilities and tech sectors shed more than 1.1 per cent following disappointing trading updates from AGL Energy and Megaport.  

What moved the market

Australian stocks retreated as fixed-income markets continued to adjust to this week’s hawkish Reserve Bank interest rate outlook. The yield on two-year Australian bonds climbed seven basis points this afternoon to a four-week high.

Two-year yields have risen 30 bp to 3.38 per cent since the start of the week in expectation there is no end yet in sight to official rate increases. The Reserve Bank raised the cash rate target to 3.35 per cent on Tuesday and warned of more hikes to come.

US stocks fell overnight as a succession of Federal Reserve officials warned the central bank has more work to do in containing inflation. The S&P 500 dropped 1.11 per cent after New York Fed President John Williams suggested rates would have to remain in “restrictive” territory for several years.

“The ASX200 has slumped today, taking its lead from a fall on Wall Street, as Fed Speakers hit the wires to beat the hawkish drums and remind markets that higher rates will be required for longer to bring down inflation,” Tony Sycamore, market analyst at IG, said.  

A choppy interim earnings season continued with a major miss from AGL. The energy utility’s shares plunged 10.33 per cent after it reported a first-half loss of $1.075 billion and halved its interim dividend.

Underlying profit slumped 55 per cent to $87 million. Managing Director and CEO Damien Nicks said the result was impacted by plant outages.

“Importantly, as units have returned to service, we’ve seen a significant improvement in portfolio performance at the end of the first half. We expect to have higher earnings in the second half of FY23, in line with guidance, and continued positive momentum into FY24,” Nicks said.

Winners’ circle

An 8.6 per cent increase in first-half net operating profit helped lift Arena REIT 0.81 per cent. The company reaffirmed its full-year distribution guidance.

Gold miner De Grey was the index’s strongest performer on a day of weak returns, rising 3.18 per cent. IDP Education gained 2.44 per cent, Downer EDI 1.54 per cent and Smartgroup 1.47 per cent.

Agribusiness Elders bounced 1.36 per cent off a two-and-a-half year low after updating investors. The company released a presentation to reassure shareholders after the share price plunged in the wake of institutional briefings this week.

ANZ was the pick of the market heavyweights, rising 0.5 per cent. Woodside Energy firmed 0.22 per cent, Fortescue Metals 0.18 per cent and BHP 0.04 per cent.

Santos finished flat after announcing production had resumed at the John Brookes platform off the coast of WA. Operations were suspended in November to fix a leak in a pipeline connecting the platform to gas processing facilities on Varanus Island.

Doghouse

Megaport slumped 4.85 per cent after reporting significant cash burn while it narrowed its first-half net loss. The tech firm cut its net loss by 37 per cent to US$9.2 million from US$14.6 million in 1H22. The closing cash balance at the end of the half was AUD$57.3 million, down from AUD$104.6 million at the end of the prior corresponding period.

Elsewhere in the tech sector, Block dropped 2.55 per cent, Xero 2.38 per cent and Nextdc 1.54 per cent.

Mesoblast hit a multi-year high before fading 1.26 per cent after the US Food and Drug Administration granted fast-track status to the firm’s treatment for lower back pain. The FDA’s Office of Tissues and Advanced Therapies granted Regenerative Medicine Advanced Therapy designation to rexlemestrocel-L. The designation is reserved to help expedite the development of treatments for unmet medical needs.

Mirvac eased 4.58 per cent after first-half statutory profit more than halved to $215 million from $565 million in 1H22. The company said the decline was primarily due to lower investment property revaluations.

Charter Hall Long WALE REIT faded 0.43 per cent after reaffirming guidance following first-half earnings of $101.2 million. The trust reported 99.9 per cent occupancy and a 0.9 per cent increase in property valuations.

Coal miners retreated after a 6.38 per cent slump in prices out of Newcastle yesterday and another 0.6 per cent decline today. Coronado shed 6.05 per cent, Whitehaven 5.85 per cent and New Hope 4.91 per cent.

Other markets

Asian markets mostly overcame early pressure. The Asia Dow was ahead 0.24 per cent at the Australian market close. China’s Shanghai Composite rose 0.62 per cent. Hong Kong’s Hang Seng gained 0.34 per cent. Japan’s Nikkei dropped 0.23 per cent.

US futures firmed after a well-received after-hours trading update from Disney. S&P 500 futures climbed eight points or 0.2 per cent.

Gold inched up for a fourth day, rising 30 US cents or 0.02 per cent to US$1,891 an ounce.

Brent crude was broadly steady at US$85.08 a barrel.

The dollar bounced 0.36 per cent to 69.53 US cents.

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