Australian shares retreated for a third straight session on Friday, capping off a week that saw concerns resurface over the strength of the global economic rebound and whether central banks will be forced to lift interest rates sooner than expected.

The ASX 200 closed 0.6 per cent lower on Friday at 6708.2, recovering from a sharp opening decline, but ultimately closed 0.9 per cent lower for the week.

The heavyweight iron ore miners extended recent losses and local energy companies slumped, with oil prices retreating for a fifth day amid concerns the European coronavirus situation will require further lockdowns.

Wall Street sold off heavily as rising bond yields smashed the tech-heavy NASDAQ. Local tech stocks finished flat on Friday, and, along with the health sector and telcos, finished higher for the week.
That’s even as sector giant Afterpay shed another 2.4 per cent to finish the week 4.5 per cent lower at a near three-month trough of $108.30.

OANDA’s Asia Pacific analyst Jeffery Halley noted the calming effect of Thursday’s “suitably dovish and inflationary nonchalant” Fed statement lasted less than 24 hours as long-end bond yields spiked on inflation fears.

Last week’s pause in the bond market sell-off ended on the rollout of better-than-expected economic data both home and abroad, including a surprise 89,000 increase in Australian employment in February that sent the jobless rate from 6.3 per cent to 5.8 per cent.

Higher bond yields increase the cost of borrowing for both companies and consumers, and generally translate into lower stock valuations, especially for higher growth companies.

Principal Global Investors’ chief global market strategist Seema Shah said economic reflation in response to stronger global growth certainly proved a key driver of the week and was shaping up to be the defining theme for 2021.

“Central banks are acutely aware of the underlying vulnerabilities that rising policy rates would expose,” she said.

“Thus, we can expect them to tread extremely cautiously. We expect that any uptick in core inflation in the near term will be viewed as a welcome sign of a gradual return to normal given the substantial economy-wide output gaps.“

ASX iron ore giants BHP, Rio Tinto, and Fortescue Metals were major laggards for the week.
Rio shed 1.5 per cent over the five sessions to close at $109.06 - its third straight week of losses. BHP ended 1.7 per cent lower for the week at $44.90 and Fortescue dropped 1.4 per cent to finish at $20.01, both also marking three weeks in the red.

The major banks were also bruised amid the inflation jitters, Commonwealth Bank down 2.1 per cent for the week, ANZ flat, and NAB down 0.7 per cent. Westpac bucked the trend, adding 0.3 per cent.

Healthcare shares slumped on Friday but finished a collective 1.3 per cent higher for the week, while the energy sector sagged 2 per cent for the day and 2.6 per cent lower for the week.