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The share market scaled its highest level since May after energy prices rebounded and Wall Street rallied ahead of tomorrow’s Thanksgiving holiday.
The S&P/ASX 200 traded as high as 7246.6 before paring its gain to 50.5 points or 0.7 per cent at 7231.8.
Energy producers and gold miners were among the session’s best performers. Qantas flew to a pandemic-era high after raising its profit outlook. Tech and property stocks were the only significant drags.
What moved the market
Optimism about a slowdown in interest rate hikes kept the post-September global recovery alive. US investors took advantage of thinning holiday-week trade to lift the S&P 500 1.36 per cent to a two-and-a-half month high.
The gains came after a Fed official said it would be appropriate to scale back next month’s interest rate increase. Futures markets have priced in a 50 basis point increase following four straight hikes of 75 bp.
“I think we can slow down from the 75 at the next meeting. I don’t have a problem with that, I do think that’s very appropriate,” Cleveland Federal Reserve President Loretta Mester told CNBC.
The market took in its stride news of further restrictions as China battles its biggest Covid outbreak since April. Chengdu today announced mass testing for the rest of this week. Shenzhen declared citizens will need to pass Covid tests to access public venues. Beijing and Guangzhou were already in partial lockdown.
“There is this sentiment that today or tomorrow, the Chinese economy will swing back into action. Covid related restrictions are momentary setbacks,” Kunal Sawhney, CEO of research group Kalkine, said.
“Although they have hurt industrial activity in the world’s fastest-growing economy, China can still create enough demand for energy and materials when industrial activity recovers. There is also optimism that the government and central bank are closely watching the economic slump, and agencies might react anytime with new measures to spur activity.”
The market was also untroubled by bearish signals from across the Tasman. New Zealand’s central bank raised its benchmark rate by 75 basis points and forecast a year-long recession. Reserve Bank of NZ Governor Adrian Orr said the bank expected a “shallow recession” in 2023 as interest rates peak at around 5.5 per cent.
Back home, data this morning showed the private sector contracted for a second straight month. The S&P Flash Australia Composite Output Index sank to a ten-month low at 47.7 from 49.8 in October. Business confidence slipped to its lowest since April 2020.
“The service sector continued to be affected by higher interest rates and capacity constraints, leading to a sharper fall in business activity,” Jingyi Pan, Economics Associate Director at S&P Global Market Intelligence, said.
“The mix of deteriorating demand and worsening price pressures does not bode well for the near-term outlook, and this has also been reinforced by the decline in private sector confidence in November,” Pan added.
Winners’ circle
A profit upgrade carried Qantas up 5.28 per cent to its highest level since February 2020. The airline now expects an underlying first-half profit before tax of $1.35-$1.45 billion, up $150 million from previous guidance.
“Consumers continue to put a high priority on travel ahead of other spending categories and there are signs that limits on international capacity are driving more domestic leisure demand, benefiting Australian tourism,” the company said.
Diversified miner Chalice Mining popped 6.45 per cent after drilling broad zones of sulphide mineralisation outside the current resource at its Julimar mine in WA. The miner said the results highlighted the mine’s near-term growth potential.
Coal miners shone for a second day as Newcastle coal rates climbed 1.6 per cent to a three-week high. Whitehaven gained 5.6 per cent. New Hope rose 2.77 per cent.
Elsewhere in the energy space, Beach Energy gained 2.63 per cent, Woodside Energy 0.91 per cent and Santos 0.67 per cent.
Gold miners rallied as a pause in the US dollar rally helped precious metals steady after four straight losses. Gold Road Resources put on 4.24 per cent, West African Resources 3.11 per cent and Newcrest 2.39 per cent.
At the speculative end of the market, traders continued to seize on any announcement referencing battery metals. Codrus Minerals soared 95.65 per cent after entering into a farm-in and joint venture with unlisted Talgomine Minerals for up to a 90 per cent interest in a rare earths project in WA’s wheatbelt.
Mitre Mining rallied 29.41 per cent after acquiring Bellpark Minerals, owner of two lithium projects. The first assays from Aruma Resources’ Mt Deans lithium-rubidium project briefly lifted the share price 28 per cent. By the close, that gain had dwindled to 1.28 per cent.
Lord Resources advanced 19.15 per cent after reporting lithium anomalies at its Horse rocks project near Coolgardie.
Doghouse
Employee management services provider Smartgroup slid 2.86 per cent to a two-and-a-half-year low following disappointing earnings guidance. The firm expects calendar-year net profit in the range of $60-$61 million, down from $69.5 million last year.
WiseTech fell 6.66 per cent despite reaffirming guidance at today’s AGM. CEO Richard White said business was tracking in line with expectations. The firm expects earnings growth of 21-30 per cent.
Medical device developer PolyNovo sank 8.85 per cent to $1.90.5 after raising $30 million from institutional investors at $1.90 per share. Part of the proceeds will be used to build a new manufacturing and research facility in Port Melbourne.
Biotech Mesoblast eased 1.01 per cent despite reducing cash burn while it develops its flagship product. The company reported a quarterly loss of US$16.9 million, down from $22.7 million in the prior corresponding period. The company had cash on hand of US$85.5 million at September 30.
Abacus Property dipped 1.46 per cent after reaffirming distribution guidance, but warning of pressure on office occupancy rates. First-quarter occupancy declined 170 basis points to 93 per cent. Managing Director Steven Sewell said there was a trend towards tenants renewing leases on shorter terms, due to economic uncertainty.
Other markets
Asian markets mostly nudged higher. The Asia Dow improved 0.32 per cent. Hong Kong’s Hang Seng added 0.42 per cent. China’s Shanghai Composite dropped 0.19 per cent.
US futures drifted lower ahead of the last session before Thanksgiving. S&P 500 futures eased three points or 0.07 per cent.
Oil pared last night’s 1 per cent rally. Brent crude dipped 21 US cents or 0.24 per cent to US$87.49 a barrel.
Gold faded US$5.10 or 0.3 per cent to US$1,734.80 an ounce.
The dollar eased 0.12 per cent to 66.38 US cents after rising 0.6 per cent overnight.
