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A closing-auction bounce powered the share market to a fresh peak ahead of a huge week of corporate earnings.

The S&P/ASX 200 finished 27 points or 0.36 per cent ahead, with most of the buying coming in the auction when institutional traders make their moves. The index was just ten points ahead when regular trade ended at 4 pm.

Today’s record close was the index’s fourth in five sessions. Gains in the banks, Afterpay, CSL and Wesfarmers outweighed declines in BHP, Rio Tinto and Fortescue Metals.

For the week, the index rallied 146 points or almost 2 per cent, its best return in two months. Most of the gains came on Monday as a takeover offer for Afterpay and a merger deal between Santos and Oil Search helped lift the market 99 points.

What moved the market

Positive US leads and an upbeat assessment of the economy from the Reserve Bank helped keep the market on the upswing as the miners responded to a plunge in the nation’s most valuable export.

The S&P 500 rallied 0.6 per cent overnight to a new high as a solid decline in claims for unemployment benefits rekindled hopes for tonight’s monthly jobs report. Investors will look for a “Goldilocks” number – not so hot as to force the Federal Reserve to reassess its rates timetable and not so cold as to trigger growth worries.

“If we drop back below about 300,000, that would be a concern, showing that the medical issues and labor shortages really could be slowing the recovery,” Brad McMillan, chief investment officer at Commonwealth Financial Network, wrote.

“A better result would be in line with the average for the second quarter, or around 500,000 to 600,000. This would show that the recovery continues and that while the medical and labor issues are preventing further acceleration, the economy still has enough momentum to keep moving forward at a reasonable rate.”

Back home, the Reserve Bank sought to dampen concerns about the economic hit from Covid after Victoria and the NSW Hunter region joined Greater Sydney and south-east Queensland in lockdown.

Governor Philip Lowe told the House of Representatives Standing Committee on Economics it was “quite unlikely” the economy would fall into recession (defined as two quarters of negative GDP). Mr Lowe said the economy would contract this quarter, but likely start to recover in the last three months of the year.

“The experience both in Australia and elsewhere is that once restrictions are lifted, spending recovers strongly, especially if people have confidence about the future. While the exact timing of the bounce-back is difficult to predict, it is likely to start well before the end of the year,” he said.

Also limiting downside today were expectations for the next stage of the full-year earnings season. Record highs this week for News Corp, Nick Scali, Pinnacle Investments and Centuria following updates have firmed up hopes for a bumper season.

“In the action-packed week that awaits, the Australian market would continue to be driven by the ongoing earnings season,” Kalkine Group CEO Kunal Sawhney said. “CBA, AMP, Telstra, IAG, Suncorp, QBE, Transurban, and AGL are slated to release their earnings reports.

“While these companies are confident of revealing sound and within expectations results, the COVID-19 factor, internal challenges, and the ongoing global economic and political risks might heavily impact results. It is good to see the confidence that these businesses have that reflects in their outlook.”

Winners’ circle

The financial sector has provided the heft for this week’s push to record levels. CBA hit a seven-week high this morning before paring its gain to 0.33 per cent. ANZ added 0.96 per cent, NAB 0.57 per cent and Westpac 0.92 per cent.

Afterpay was the biggest mover at the top end, rising 5.5 per cent. US suitor Square’s share price rallied 1.09 per cent overnight.

Other tech/BNPL gains included Nuix +4.42 per cent, EML Payments +4.14 per cent, Z1p Co +1.72 per cent and Altium +1.57 per cent.

News Corp was the index’s best performer after a 30 per cent increase in Q4 revenues helped the media giant raise full-year revenues by 4 per cent to $9.36 billion. Highlights included record digital subscriptions, record profits at Move and HarperCollins and the largest profit at Dow Jones since it was acquired in 2007. The share price climbed 7.88 per cent to its strongest level since a corporate shake-up eight years ago.

“Fiscal Year 2021 was the most profitable year since we created the new News Corp in 2013,” Chief Executive Robert Thomson said.

BetMakers surged 13.46 per cent on news New Jersey had become the first state in the US to legalise fixed odds betting on horse racing. BetMakers has an exclusive ten-year deal to manage and deliver fixed odds racing in the state.

Wesfarmers‘ run of records continued with a rise of 0.95 per cent. CSL firmed 1.41 per cent, Woodside 1.38 per cent and Goodman 0.99 per cent.

ResMed inched up 0.24 per cent as a warning about component shortages took some of the shine off strong revenue growth. Full-year revenues increased by 8 per cent to $3.2 billion. Operating profit improved 12 per cent. CEO Mick Farrell reportedly told analysts on a call this morning that production over the next six months would be crimped by supply constraints.

Doghouse

Bulk metal miners were the heaviest weight on the index following a sharp deterioration in iron ore prices. The spot price for ore landed in China dived 7.2 per cent to its weakest level since April.

“It looks like China wants to redirect its economy towards strategic industries. For this, regulators are pushing companies to do more to serve the Communist Party’s goals, rattling markets,” Kalkine’s Mr Sawhney said.

BHP fell 1.96 per cent to a two-week low. The company announced it will proceed with the Shenzi North oil project in the Gulf of Mexico. The new wells are expected to pay back an initial investment of US$544 million within two years.

Fortescue Metals dropped 0.95 per cent, Rio Tinto 1.57 per cent and Champion Iron 4.39 per cent.

Property advertising group REA warned listings had been negatively impacted by lockdowns. In addition, the company’s Indian business remained “volatile” due to the effects of Covid.

REA hit record levels this year in anticipation of strong revenue growth as property prices flew higher. The company’s share price sagged 4.7 per cent despite revenue growth of 13 per cent and an increase in net profit of 18 per cent.  

Rival Domain Holdings fell 4.94 per cent. Domain reports later this month.

Other markets

Record Covid numbers for the current outbreak in China kept a lid on Asian markets. The Shanghai Composite retreated 0.62 per cent. Hong Kong’s Hang Seng dipped 0.07 per cent and the Asia Dow 0.04 per cent. Japan’s Nikkei rose 0.25 per cent.

US futures traded narrowly lower. S&P 500 futures eased a point or 0.02 per cent.

Oil rose for a second session. Brent crude advanced 28 US cents or 0.39 per cent to US$71.57 a barrel.

A rising US dollar pushed gold down US$6.10 or 0.34 per cent to US$1,802.80 an ounce.

The dollar retreated 0.17 per cent to 73.9 US cents.

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