SYDNEY, AAP – The Australian share market has posted a loss on the last trading day of 2021 but still finished a bumper year with gains of 13 per cent over the last 12 months.

The benchmark S&P/ASX200 index closed Friday’s shortened New Year’s Eve session 68.8 points, or 0.92 per cent, lower at 7444.6 points.

The All Ordinaries index fell 64.5 points, or 0.82 per cent, to 7779.2 points.

Weak trading had been expected after shares dropped overnight on Wall Street, but sentiment turned markedly cautious amid a surge in local COVID-19 cases, prompting some cashing out of profits.

“It’s been a year of two halves,” Burman Invest chief investment officer Julia Lee said.

“The first part of the year there was a marked increase but the second half has seen a bit of sideways movement as we’ve been plagued by the Delta lockdowns and are now dealing with the Omicron variant.”

Australia crossed 30,000 daily infections on Friday for the first time since the pandemic began. NSW reported 21,151 new infections, Victoria posted a record 5919, Queensland 3118 and South Australia another 2093.

That was enough to knock down a rebound in the last week of the year that took the indices to a near three-and-a-half month high on Thursday.

Investors took advantage of light trading volumes to book profits ahead of the extended weekend. The market will remain shut on New Year’s Day.

Losses were broad-based on Friday, with every single sectoral index closing in the red.

Healthcare stocks were the worst affected, while the heavyweight financial, mining and energy sectors also ended firmly in the red.

Shares in some of the best performing healthcare stocks, including Ansell, Healius, Cochlear and ResMed closed 1-3 per cent lower.

The Big Four banks ended between 0.7 and 1.5 per cent lower. Other key financial stocks, including retirement fund manager Challenger, fund manager Magellan Financial, and insurers QBE and Suncorp dropped between 1.3 and 4 per cent.

Stronger iron ore prices helped Fortescue Metals and Rio Tinto end on a high note, but the mining sector was otherwise a sea of red.

Safe haven gold stocks were the exception as investors turned risk averse, helping lift Newcrest, Northern Star and Regis Resources between 1 and 4 per cent.

Outlook for the two biggest sectors that make up the ASX indices continues to be strong.

Analysts expect the major banks to benefit from higher interest rates in 2022 as central banks around the world look to lift rates.

The big iron ore miners are also likely to benefit from the expected improvement in demand from China post the Beijing Winter Olympics.

“Taking into account the monetary policy stance and current macro factors, I would be expecting the market to keep making those gains in the first half of the year,” Ash Glover, Head of APAC sales trading at CMC Markets, said.

“It’s still a perfect environment for people to get into the stock market. The foundations are still there for a run higher.”

However, others cautioned about the impending headwinds as the market grapples with the tapering of credit cycle by central banks and how the pandemic evolves.

January is seen as an important time for investors as companies detail hits and misses ahead of the half-year earnings season in February.

“One of the key risks is the labour shortages and costs that are going to affect companies’ revenues and profitability,” Ms Lee said.

Meanwhile, the Australian dollar was largely steady in the final session, but is down nearly 6.0 per cent for the year. It was buying 72.56 US cents at 1600 AEDT, compared to 72.50 US cents at Thursday’s close.

ON THE ASX

* The benchmark S&P/ASX200 index closed 68.8 points, or 0.92 per cent, lower on Friday at 7444.6 points.

The All Ordinaries index fell 64.5 points, or 0.82 per cent, to 7779.2 points.

* At 1600 AEDT, the SPI200 futures index was down 88 points, or 1.18 per cent, at 7347 points.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 72.56 US cents, from 72.50 cents on Thursday

* 83.48 Japanese yen, from 83.44 yen

* 64.09 Euro cents, from 64.01 cents

* 53.75 British pence, from 53.78 pence

* 106.27 NZ cents, from 106.12 cents.