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Tax loss selling sends ASX 200 lower, time to buy ASX shares?

Tax-loss selling hit the S&P/ASX 200 (INDEXASX: XJO) and All Ordinaries (ASX: XAO) on Thursday, the final day of the financial year, with the market sinking close to 1 per cent into the close to finish 2 per cent lower.

Every sector of the S&P/ASX200 finished in the red, with healthcare (down just 0.2 per cent) the rare outperformer. The winners of the year were the losers on the final day with materials falling 2.8 per cent, energy 2.5 per cent and utilities 2.9 per cent.

AGL Energy Ltd (ASX: AGL) and Origin Energy Ltd (ASX: ORG) fell on the final day of the year, down 1.7 and 3.4 per cent while Ramsay Healthcare Ltd (ASX: RHC) was a rare highlight, finishing flat. Energy retailer AGL remains in the crosshairs of global private equity with Brookfield quietly acquiring a 2.5 per cent interest in the company after being rebuffed on an earlier takeover bid. The major ETF providers also outlined the expected distribution to be paid this week, with prices of every ETF set to fall to reflect the payment of cash out of the fund.

Debt collector Collection House Ltd (ASX: CLH) will not emerge from a trading halt with the company announcing it had appointed administrators, after being unable to raise additional capital and restructure its debt. Collection House shares were down 95 per cent year to date.

Ardent Leisure Group Ltd (ASX: ALG) gained 3.7 per cent after the company confirmed it will return $455 million in proceeds received from the sale of the US cinema business Main Event. This will come in the form of a 48-cent dividend and 46-cent per share return of capital to Ardent shareholders.

ASX finishes financial year 11% lower

The chart above shows the performance of an ETF that tracks Australia’s 200 largest shares, the BetaShares Australia 200 ETF (ASX: A200). Learn more about ASX: A200.

The Australian share market finished the financial year with a rare negative return, falling 11.8 per cent for FY22, with all of this coming after the calendar year. The Australian share market is down 12.4 per cent since January 1.

On a sector basis, the story is simple: energy and utilities have won over the short and longer-term, the energy gaining 26 per cent and utilities up 13 per cent over the 12 months. Every other sector, including ASX bank shares, ended the financial year lower.

China recovery begins

There are signs that the Chinese economy may be readying to become the powerhouse of the globe again with the services PMI rebounding from 47.8, being a contraction, to 54.7 in June.

In the USA , the half-year ended on a decidedly negative note on Thursday, with US stocks dropping across the board. The Dow Jones fell 0.6 per cent as 29 of the 30 index constituents finished in negative territory. Travelers Companies Inc (NYSE: TRV) was a rare winner with the likes of Salesforce (NYSE: CRM) and Boeing (NYSE: BA) being hit by more bad news for the domestic consumer. Both the S&P500 and Nasdaq fell, dropping 0.5 and 0.8 per cent respectively, following another downgrade to US GDP that showed the economy contracted more than expected.

On a positive note, consumer inflation or PCE (Personal Consumption Index) was only 0.2 per cent higher which suggests that inflation pressures may be reversing. That said, this can be a negative sign for the economy if the consumer stops spending due to rising rates and fuel prices. Bond yields have begun to turn as the outlook worsens.

For the first half of 2022, the Dow Jones finished down 15.3 per cent, the S&P500 20.6 and the Nasdaq 29.5 in the worst start since 1970.

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