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The share market bounced off 16-week lows as improving US futures encouraged investors to look past Wall Street’s worst night in four months.
The S&P/ASX 200 rallied 26 points or 0.35 per cent to 7274. The index closed more than 80 points off its session low after dipping under 7200 for the first time since early June.
The market hit its nadir in the first ten minutes of trade and improved steadily from then. Early gains in the battered mining sector broadened into a wider rally that lifted all sectors except financials.
What moved the market
The wall of worry looked steeper this morning than it has for months, but bargain-hunters took advantage of the cheapest share prices since June. A rebound in the big three iron ore producers from 2021 lows encouraged investors to ignore continuing tremors on Asian markets.
Hong Kong’s Hang Seng declined 0.34 per cent as the troubled Evergrande Group fell 2.6 per cent. The Asia Dow shed 0.79 per cent. Japan’s Nikkei index dropped 1.86 per cent.
Instead investors took their cues from a rebound in US equity futures. S&P 500 futures bounced 16 points or 0.36 per cent. Dow futures rallied 166 points or 0.5 per cent.
US stocks crumbled overnight as investors decided the headwinds had grown too big to ignore. Corporate tax hikes, an approaching federal debt ceiling, fading growth, stubbornly high Covid numbers and trouble in China’s overextended property market sent traders to the lifeboats. The S&P 500 sank 1.7 per cent, its heaviest loss since May.
“What’s happened here is that the list of risks has finally become too big to ignore,” Michael Arone, chief investment strategist at State Street Global Advisors, told MarketWatch. “There’s just a lot of uncertainty at a seasonally challenging time for markets.”
Pullbacks have been scarce during the 18-month bull market since the initial pandemic sell-off. Neither Wall Street nor the ASX have seen a technical correction, defined as a retrace from a peak of at least 10 per cent.
The ASX 200 has fallen 3.5 per cent so far this month and is on track for just its second losing month since the March 2020 market bottom. The other was last September, underlining the seasonal factors at play on both sides of the Pacific.
Winners’ circle
Bargain-hunters turned their attention first to the mining giants responsible for much of this month’s weakness. Rio Tinto rallied 0.49 per cent, BHP 0.59 per cent and Fortescue Metals 0.34 per cent. All three traded at 2021 lows yesterday as iron ore slumped to its weakest in 16 months.
AusNet jumped 9.75 per cent after APA Group topped Brookfield’s offer for the electricity infrastructure provider. A day after Brookfield offered $2.50 a share, APA made a non-binding, indicative offer of $2.60 in cash and scrip.
“The proposal would bring together two high quality businesses and create a listed flagship Australian group with the scale and capability to accelerate the $20 billion growth in electricity transmission infrastructure needed to support the decarbonisation of Australia’s economy,” APA said in a market release.
The offer values AusNet at around $10 billion. APA Group slid 4.73 per cent to an 18-month low.
Aside from AusNet, the session’s best performers included several stocks trading at or near 2021 lows. Champion Iron firmed 4.24 per cent, Regis Resources 1.01 per cent and Mesoblast 3.12 per cent.
A rebound in crude lifted Woodside Petroleum 1.65 per cent. Brent crude rallied 56 cents or 0.8 per cent to US$74.48 a barrel, recouping more than a third of overnight losses. Beach Energy firmed 2.87 per cent and Santos 1.14 per cent.
Beyond the mining space, heavyweight gainers included Aristocrat Leisure +1.33 per cent, Telstra +1.29 per cent, CSL +0.97 per cent and Wesfarmers +0.86 per cent.
Toll road operator Atlas Arteria rose 2.11 per cent after announcing a first-half distribution of 15.5 cents per security, in line with last month’s guidance. Transurban remained in a trading halt while it raises funds to buy out the NSW Government’s stake in the WestConnex toll road in Sydney.
Doghouse
The financial sector was the biggest drag on the index in the wake of a sharp decline in bond yields. Macquarie Group shed 1.01 per cent. CBA lost 0.47 per cent, NAB 0.88 per cent and Westpac 0.43 per cent. ANZ gained 0.04 per cent. The yield on ten-year Australian government bonds slumped four basis points following a similar retreat in the US.
Kathmandu fell 1.4 per cent after warning this year’s first half would be worse than last financial year due to the impact of lockdowns. The outdoor sports retailer said total sales at its namesake stores were 19.9 per cent lower over the six weeks to September 12. Rip Curl sales fell 12.8 per cent.
Pharmaceutical wholesaler Sigma Health declined 2.38 per cent after reporting a first-half net loss of $1.3 million. Underlying earnings increased 14.7 per cent to $39.2 million. The company will pay a dividend of 1 cent per share.
Other markets
Gold dipped 20 US cents or 0.01 per cent to US$1,763.60 an ounce.
The dollar improved 0.07 per cent to 72.65 US cents.
