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A choppy week faded towards a second straight weekly loss as the threat of higher interest rates here and in the US continued to sap buying interest.

The S&P/ASX 200 declined 475 points or 0.63 per cent this morning to 7375. The fall put the index on track for a weekly deficit of 70 points or 0.9 per cent.

Gains in select defensive sectors were outmuscled by falls across the wider market. Sectors most exposed to rate hikes fell hardest. Insurer QBE was the morning’s best performer after forecasting a year of solid growth in written premiums.  

What’s driving the market

A see-saw week slid towards a dour conclusion amid negative signs on interest rates both here and Stateside. US stocks sank overnight after wholesale inflation surged last month. The S&P 500 fell to a loss of 1.38 per cent.

“Higher than-expected producer prices in January are being seen in conjunction with the US CPI data, confirming that taming inflation is more challenging than the market thinks,” Kunal Sawhney, CEO of research group Kalkine, said.

“The new worry over the next few weeks could be the fear that the next Fed hike could be as high as 50 bps,” he added.

Hopes of a rates pause here were dashed once more this morning by RBA Governor Philip Lowe. Stocks rallied yesterday after the jobless rate unexpectedly climbed to 3.7 per cent in January from 3.5 per cent in December. Total employment declined for a second straight month.

Lowe told a House committee the jobs report would have little impact on the bank’s rates outlook. He said seasonal factors made data from the last two months difficult to assess. The central bank chief reiterated the now-familiar mantra that further rate hikes were probable with inflation at 7.8 per cent at the end of last year.

“Based on the currently available information, the Board expects that further increases will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary,” Lowe said.

Sawhney said the bank would need to see a decline in inflation before considering a change in policy.

“Even though unemployment rate has ticked higher for two months in a row, employment levels have yet to fall from near historic levels. The RBA looks at the broader picture, not any single data set, which is why inflation would have to drop before we can expect any decisive shift in the bank’s monetary policy stance,” he said.

Going up

QBE soared 8.73 per cent after forecasting mid-to-high single-digit growth in written premiums this year. The insurer hiked its dividend to 39 cents per share from 30 cents in 2021 after booking a calendar-year net profit of US$770 million.

a2 Milk climbed 5.39 per cent on progress towards meeting new Chinese food standards. China’s Ministry of Primary Industries will start an audit on a2’s dairy processor Synlait’s facility next week. Synlait shares climbed 4.46 per cent.

GUD Holdings gained 2.5 per cent, rising for a third day since announcing an 88.7 per cent jump in first-half profit.

The defensive utilities and consumer staples were the only sectors to advance. Origin Energy tacked on 1.96 per cent, GrainCorp 1.91 per cent and Coles 0.49 per cent.

Westpac firmed 0.26 per cent after reporting a modest uptick in mortgage delinquencies. Repayments more than 30 days late crept up to 1.24 per cent last quarter from 1.21 per cent in the September quarter. The bank attributed the rise to cost of living pressures and seasonal factors.

Commonwealth Bank edged up 0.35 per cent towards its first gain since Wednesday’s poorly-received earnings update.

The big three bulk metal producers all rose with the price of iron ore. Fortescue Metals put on 0.74 per cent, Rio Tinto 0.7 per cent and BHP 0.27 per cent.

HomeCo Healthcare and Wellness REIT lifted 2.91 per cent after upgrading its funds from operations guidance (FFO). The trust expects growth of 15 per cent from FY22. FFO guidance was raised to 7.1 cents per unit from previous guidance of 6.8 cpu.  

Going down

Logistics software specialist WiseTech eased 3.51 per cent after paying US$414 million for a North American supply chain solutions provider. Blume Global manages rail containers and chassis, ocean carriers and global freight. The purchase will be funded through a mix of debt from new facilities and by issuing shares to the vendors.  

Poultry business Inghams trimmed a sharp early loss to 1.64 per cent after reporting a turnaround in earnings last half as farming operations recovered. Earnings of $197 million were 10.6 per cent lower than the prior corresponding period, but 31.3 per cent stronger than the previous half.

Inghams CEO and Managing Director, Andrew Reeves, said, “Our results for the first half represent a significant improvement for the business over second half of FY22, and we expect this positive momentum to continue as we proceed through the second half of the financial year.”

A 67 per cent slump in first-half statutory net profit from the prior corresponding period pulled Baby Bunting down 6.3 per cent. Sales increased 6.6 per cent from the previous half. Gross margin contracted by 212 basis points to 37.2 per cent as the retailer battled supply chain cost increases and rising domestic transport costs. Matt Spencer will leave the business this year after 11 years as CEO.

Finance group Latitude sank 3.14 per cent after a 23 per cent slump in full-year cash net profit prompted a dividend cut. Shareholders will receive a final dividend of four cents per share, half the amount paid in 2021. Bob Belan will replace Ahmed Fahour as CEO and Managing Director in April.  

Centuria Industrial REIT sank 5.33 per cent to $3.28 after placing 26.3 million units at $3.33 as part of a $300 million exchangeable note offering. The funds will be used to repay existing debt and for general corporate use.

Tyro Payments dipped 2.73 per cent after settling a class action over connectivity issues at its payment terminals in 2021.

Other markets

US futures fell with Asian markets. S&P 500 futures were recently off eight points or 0.2 per cent.

The Asia Dow gave up 0.66 per cent, China’s Shanghai Composite 0.13 per cent, Hong Kong’s Hang Seng 0.14 per cent and Japan’s Nikkei 0.41 per cent.

Oil eased for a fourth session. Brent crude fell 32 US cents or 0.4 per cent to US$84.82 a barrel.

Gold unwound last night’s 0.4 per cent advance, falling US$9.40 or 0.5 per cent to US$1,842.40 an ounce.

The dollar bounced 0.06 per cent from an overnight six-week low to 68.66 US cents.

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