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A rebound in advertising revenues and a positive response to a major restructure at Telstra helped cushion the ASX against declines in banks and miners.

The S&P/ASX 200 retreated 18 points or 0.3 per cent after earlier setting a new eight-month high. The index fell away as losses deepened in the financial, energy and materials sectors.

What’s driving the market

AGM season and trading updates delivered most of the upside as the broader market took a breather. A busy morning of corporate trading updates saw gains in Telstra, Nine Entertainment, Seven West Media and Wesfarmers. Banks and miners retreated following an eight-session run that has added 8.8 per cent to the ASX 200 in eight sessions.  

Most US stocks rose overnight, but the underlying dynamics changed. The so-called ‘rotation rally’ faltered as traders reverted from cyclical stocks to the technology giants that outperformed during the pandemic. The Nasdaq Composite put on 2.01 per cent. The broader S&P 500 added 0.77 per cent. The cyclical-heavy Dow Jones Industrial Average eased 23 points or 0.08 per cent.

“It’s been a relatively quiet night,” Ray Attrill, Head of FX Strategy at NAB, said. “Today’s sentiment and flow is back favouring ‘stay at home’ stocks after the early-week euphoria and heavy tech-sector sell-off following the Pfizer-BioNTech vaccine trial news.”

Optimism over Monday’s news that Pfizer and BioNTech’s vaccine was 90 per cent successful in preventing Covid-19 was tempered by spiralling infection rates in the US. The seven-day moving average of new cases reached 108,964 this week – more than a third higher than a week ago. The total number of cases in the US passed 10 million.

Going up

The market split broadly down the middle. Tech stocks, communications, health and consumer stocks rose. Industrials, financials and resources fell.

Telstra soared 4.4 per cent to a three-month high after the company unveiled plans to divide the business in three. The largest change since the government floated the company in 1997 will see infrastructure assets divided into mobile and fixed line. A third entity would support both networks. The split would pave the way for possible sales of the infrastructure.

Media stocks Nine Entertainment and Seven West Media were the morning’s best performers following well-received AGM updates. Nine Entertainment gained 3.8 per cent after upgrading its first-quarter revenue estimate to reflect a significant improvement in free to air advertising. Seven West Media said it had fixed holes in its schedule and seen an improvement in ad sales since August. The share price jumped 4.8 per cent.

Wesfarmers hit its highest level since late August after flagging brisk post-lockdown sales in Melbourne and strong growth at Bunnings as online sales doubled. The retail conglomerate’s share price rose 2.8 per cent.

Xero hit an all-time high before fading during a strong morning for tech stocks following gains on the Nasdaq. The accounting software company slid 0.7 per cent after reporting a 21 per cent rise in half-year revenue to $409.8 million and a 19 per cent increase in subscribers. Afterpay climbed 3.8 per cent, NextDC 2.6 per cent and Appen 1.8 per cent.

Among other companies holding AGMs today, Sonic Healthcare gained 0.3 per cent and Medibank Private 3.2 per cent. Graincorp was unchanged after announcing a statutory full-year profit of $343 million despite a third year of drought.

Going down

More than two-thirds of the index heavyweights retreated this morning. Iron ore miner Fortescue Metals sank 3.6 per cent a day after flagging a strategic move into green energy. BHP slid 1.1 per cent and Rio Tinto 0.5 per cent.

NAB fell 1.7 per cent as it traded without its dividend. Westpac gave up 1.9 per cent, CBA 1.5 per cent and ANZ 0.6 per cent.

The energy sector took a breather after surging 16 per cent in three sessions. Oil Search dipped 1.4 per cent, Santos 1.9 per cent and Woodside 1.2 per cent.

An unhappy week for gold stocks continued. Ramelius Resources slid 3.7 per cent to a near five-month low. Saracen Mineral sank 3 per cent, Westgold 3.6 per cent and Newcrest 0.7 per cent.

Vicinity Centres declined 2.1 per cent after warning foot traffic at its malls continues to be impacted by travel restrictions and city staff working from home. Nearmap dipped 2 per cent after reaffirming guidance within consensus forecasts.

Other markets

The mood remained positive on Asian markets. Japan’s Nikkei and Hong Kong’s Hang Seng gained 0.8 per cent. China’s Shanghai Composite added 0.1 per cent.

US index futures turned negative, reversing early gains. S&P 500 index futures were recently down three points or 0.1 per cent.

Oil added to its 11 per cent rise since Monday. Brent crude climbed 31 cents or 0.7 per cent to $US44.11 a barrel. Gold inched up $4.20 or 0.2 per cent to $US1,865.90 an ounce.

The dollar inched up 0.02 per cent to 72.85 US cents.

Hot today

News of a major boost in profitability lifted industrial minnow EVZ (ASX:EVZ) to its highest level in a year and a half. Shares more than doubled from 11 cents to 25 cents after the engineering services group announced it expected a first-half profit of $3 – $3.5 million, three times last year’s pre-tax profit of $1.07 million. Revenues are expected to be between and $30 and $32 million. The share price had lately pared its rise to 45.5 per cent at 16 cents.

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