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The share market continued its recent run of heavy morning falls followed by afternoon recoveries, finishing today’s session with a modest advance.
The S&P/ASX 200 skidded 1.1 per cent in the first hour of trade before launching a session-long fightback. The index closed six points or 0.07 per cent ahead, mirroring similar rebounds last week.
A reversal in most of the banks, as well as gains in tech stocks helped offset weakness in commodity stocks. Fortescue Metals dived almost 11 per cent as its shares traded without the right to a record dividend.
What moved the market
The market has slipped into a sideways trading pattern since last month’s all-time high of 7633. Buying below 7500 has been rewarding for the last two and a half weeks, but the index has struggled to advance beyond 7540. The index closed at 7528 this session, turning positive in the closing auction for the first time all session.
The lapse into sideways drift mirrors a recovery in the dollar from a nine-month low. The Aussie bottomed at 71.06 US cents on August 20 and has since climbed almost four cents in two weeks, hitting 74.78 cents on Friday. The rally offered overseas traders an opportunity to cash in on currency gains. In addition, a strong dollar is generally seen as a net negative for Australia’s export-driven economy.
Buyer appetite this session was curbed by uncertainty over tomorrow’s Reserve Bank policy meeting. Policymakers gather tomorrow under pressure to reverse last month’s decision to reduce the bank’s bond-buying program.
Economists are divided over whether the bank will backtrack following a run of dire economic data as lockdowns in NSW, Victoria and ACT plunge the economy back into the deep freeze. Westpac has called for the bank not only to reverse its taper decision, but to expand the program temporarily. NAB, on the other hand, expects the bank to stick to its plan.
“NAB expects the RBA to continue with the scheduled taper to the pace bond purchases to $4bn per week from the current $5bn per week,” Tapas Strickland, NAB Director, Economics, said.
“Expectations for a strong rebound in activity after the current lockdowns remain largely intact, though the optics of tapering amid protracted lockdowns means it is likely to be a close decision.”
Job advertising slumped 2.5 per cent last month, but remained well above last year’s low. Ad numbers have declined just 3.7 per cent since the start of the Greater Sydney lockdown, versus a plunge of 64 per cent last year.
Weak leads from Wall Street and a US market holiday tonight capped trading volumes this session. US stocks closed mixed heading into the Labor Day long weekend. The Nasdaq Composite climbed 0.21 per cent, the Dow fell by the same margin and the S&P 500 – the most balanced of the three – ended flat.
Winners’ circle
A ten-year high in aluminium prices helped propel Alumina 3.26 per cent to a seventh straight advance. Metal prices have been boosted by shortage fears after China imposed limits on smelters.
Tech was the pick of Friday’s US movers and the best of the sectors here. Appen climbed 4.56 per cent, Nearmap 1.94 per cent, Technology One 2.19 per cent and Afterpay 1.66 per cent.
Gold miner Newcrest advanced 2.52 per cent after a decline in the greenback helped lift gold to an 11-week peak. Evolution gained 3.85 per cent, Ramelius 2.72 per cent and Gold Road Resources 2.8 per cent.
ResMed shrugged off media reports a US university had filed a patent infringement claim against the sleep apnea specialist. The University of New York reportedly seeks unpaid royalties, interest and costs for an alleged infringement by ResMed’s AirSense 10 product. The share price overcame early weakness, rising 0.53 per cent.
IAG also overcame early pressure to advance 0.93 per cent after CMC Hospitality filed a case against the insurer over disputed claims for business interruptions caused by Covid. The insurance industry is locked in a dispute over whether business policies cover Covid-induced stoppages.
Most of the banks belatedly responded to a jump in lending rates. CBA firmed 0.31 per cent, ANZ 0.86 per cent and NAB 0.56 per cent. Westpac trimmed its loss to 0.12 per cent.
Doghouse
Fortescue Metals was the biggest drag on the index, falling 10.94 per cent. The miner will pay shareholders a record $2.11 per share. Other companies going ex-dividend included Viva Energy -3.12 per cent, Orora -2.6 per cent, Ramsay Health Care -2.28 per cent and ASX -2.82 per cent.
Santos and Oil Search declined after extending the due diligence period for their proposed merger by a week to September 13. The energy majors are negotiating terms to form one of the 20 largest oil and gas companies in the world. Santos declined 1.76 per cent. Oil Search shed 2.35 per cent.
Lithium miner Pilbara Minerals sank 5.31 per cent on news Mineral Resources divested its 5.4 per cent shareholding. Mineral Resources (MRL) sold its holding in a block trade to institutional investors for $328 million. MRL will use the funds for capital expenditure.
Hansen Technologies dived 9.24 per cent on news suitor BGH Capital had walked away. The Australian private-equity firm withdrew a conditional, non-binding offer to buy all the shares in Hansen for $6.50 cash per share after conducting due diligence. Hansen shares fell to $5.60.
Washington H Soul Pattison eased 1.75 per cent despite upgrading full-year guidance ahead of reporting later this month. The investment group expects net profit to almost double this year to $316-$336 million from $170 million in FY20, thanks to strong earnings at coal miner New Hope and record property earnings at Brickworks.
BlueBet Holdings fell 21.66 per cent after missing out on a Sports Betting Permit in Virginia. The online wagering group withdrew its application after being advised permits would only be granted to operators with experience in other states.
Other markets
Australia was an outlier during a positive session on Asian markets. The Asia Dow rallied 0.7 per cent, China’s Shanghai Composite 1.1 per cent, Hong Kong’s Hang Seng 0.88 per cent and Japan’s Nikkei 1.95 per cent.
US futures inched higher ahead of tonight’s market holiday. S&P 500 futures firmed two points or less than 0.1 per cent.
Oil declined for a second session. Brent crude fell US$1.04 or 1.4 per cent to US$71.57 a barrel after Friday’s jobs report suggested the US recovery may be losing momentum.
Gold dipped US$4.10 or 0.22 per cent from Friday’s 11-week high to US$1,829.60 an ounce.
The dollar eased 0.13 per cent to 74.33 US cents.
