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A milestone session in the share market’s long recovery from its Covid-19 lows saw the ASX 200 turn positive for the year for the first time since February.
The S&P/ASX 200 rallied as much as 69 points before trimming its final tally to 39 points or 0.6 per cent in the closing auction. The index finished at 6683, one point below where it opened on January 2. Since then, the index has been as high as a record 7197.2 and as low as 4402.5 in a year of extraordinary volatility.
What moved the market
The market’s most spectacular month since March 1988 kept giving today. The index’s tally for the month pushed beyond 13 per cent following a record night on Wall Street.
The Dow Jones Industrial Average closed above 30,000 for the first time in history, rising 1.54 per cent to 30,046. The S&P 500 and Russell 2000 index of small caps also closed at record levels. The advances followed promising vaccine results from AstraZeneca and Oxford University, and signs Donald Trump was preparing to relinquish the White House to President-elect Joe Biden.
The pace of this month’s gains prompted market-watchers on both sides of the pond to sound the alarm about excessive optimism in the market.
“We wouldn’t be putting new money to work in stocks with the Dow at 30,000 because of rising Covid-19 cases … and the likelihood of insufficient fiscal stimulus from Congress,” James McDonald, CEO of Hercules Investments in the US, said.
Here, Bruce Apted, head of portfolio management at State Street Global Advisors, reportedly warned clients this month’s action had “many similarities to a classic junk rally”.
Winners’ circle
Cyclical stocks and small caps outperformed on both sides of the pond. Energy, financials and materials steered the local index higher. The Emerging Companies Index hit a nine-year high in early trade before retreating 0.8 per cent.
The banks have done much of the heavy lifting this month, playing catch-up as the prospect of vaccines next year soothed fears of a wave of bad debts when government stimulus schemes expire in March. A day of eight-month highs saw NAB put on 3.1 per cent, ANZ 3 per cent, Westpac 2.2 per cent and CBA 1.5 per cent.
The energy sector has been the biggest winner since November 1, surging 35 per cent as investors try to get ahead of a revival in demand. Woodside Petroleum climbed 3 per cent and Santos 2.7 per cent. Whitehaven Coal jumped 10.7 per cent. Origin Energy added 4 per cent.
Media, travel and other beaten-up cyclicals continued to heal. Flight Centre rose 8.9 per cent, Webjet 7.1 per cent, Seven West Media 6.1 per cent and Qantas 1.6 per cent.
Doghouse
A tough week for gold bugs continued as an index of local miners sagged to a six-month low. The yellow metal’s role as a haven during the pandemic has left it short of friends now the outlook has improved.
“Gold prices have been trending lower for the last couple of weeks on the back of good news on the vaccine front, lower expectations for US fiscal stimulus, and higher long-term bond yields. It’s basically three strikes and you’re out,” ThinkMarkets Market Analyst Carl Capolingua said. “The last line of support is around US$1800/oz. Below this level, even the most ardent gold bugs have to start thinking that the long-term trend has turned down.”
Gold hovered perilously close to the US$1,800 level this afternoon, lately down $3 or 0.2 per cent at $US1,801.60 an ounce.
Westgold shed 4.5 per cent, Evolution Mining 2.2 per cent and Gold Road Resources 1.7 per cent. Sector heavyweight Newcrest trimmed its loss to 0.6 per cent. Troy Resources dived 16 per cent after withdrawing production guidance for its South American operation.
On the ASX 20, the biggest drags were CSL -2.5 per cent, Transurban -1.4 per cent and Brambles -1 per cent. Telstra eased 0.6 per cent and Wesfarmers 0.5 per cent.
The tech sector reversed yesterday’s gains as investors favoured cyclicals better aligned with economic revival. Megaport lost 7.2 per cent. Afterpay and NextDC gave up 5.9 per cent. Xero shed 4.4 per cent and Appen 5.4 per cent.
Shareholders took profits in Harvey Norman despite a strong sales result as the pandemic bonanza for retailers of household goods continued. Unaudited profit for the four months to October 31 jumped 160.1 per cent as revenues increased 28.2 per cent. The share price eased 2.6 per cent from around its highest level in three and a half years.
A record half-year net profit of $225.5 million was not enough for shareholders in Fisher & Paykel Healthcare. Shares fell 2.2 per cent.
Energy infrastructure giant APA dipped 0.6 per cent after announcing it will invest up to $460 million in a pipeline to connect the Goldfields region of WA with gasfields in the Perth Basin. Specialty retailer Kathmandu fell 4.2 per cent on news earnings for the first quarter were broadly in line with last year’s result.
Other markets
US index futures built on last night’s record closes ahead of tonight’s action, the last full session of the week. S&P 500 index futures climbed nine points or 0.2 per cent. Dow futures gained 47 points or 0.2 per cent.
A morning rally on Asian markets faltered as the session wore on. China’s Shanghai Composite declined 0.2 per cent. Hong Kong’s Hang Seng and Japan’s Nikkei trimmed their advances to 0.9 per cent.
Oil added to eight-month highs. Brent crude rose 51 cents or 1.1 per cent to $US48.29 a barrel.
The dollar slipped 0.14 per cent to 73.56 US cents.
Hot today and not today
Hot today: News of near-surface visible massive sulphides lit a fire under junior explorer Anax Metals (ASX:ANX). Diamond drilling at the company’s Whim Creek Project in the Pilbara intersected significant mineralisation, including copper, zinc and lead. The share price bolted 67.4 per cent to 7.2 cents.
Not today: Online retailers ran into heavy selling as some investors bet the provision of vaccines will see a reversion from online shopping back to malls. Two of the big winners from the pandemic saw sharp falls. Online marketplace Redbubble (ASX:RBL) sank 9.8 per cent. Online furniture retailer Temple & Webster (ASX:TPW) shed 9.5 per cent. Kogan (ASX:KGN) sank 5.1 per cent to a four-month low.
