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Australian shares rose for a second day as promising news about China’s troubled Evergrande property group soothed market fears of a messy default.

The S&P/ASX 200 climbed 23 points or 0.32 per cent as part of a general rally in risk assets after Reuters reported Evergrande will make a coupon payment tomorrow. In addition, China’s central bank pumped additional liquidity into the market.

US futures, oil and the Australian dollar all jumped on the news. The ASX trimmed its advance in afternoon trade ahead of a policy update tonight from the US Federal Reserve.

A rebound in mining stocks and gains for Woodside, CSL and Telstra outweighed declines in banks and supermarkets.

What moved the market

A tentative rally accelerated mid-morning when Reuters reported Evergrande will make a scheduled payment of roughly US$36 million on a domestic bond tomorrow. The ASX 200, which had been down 32 points in early trade, put on as much as 65 points before tempering gains.

However, questions remain about the outlook for China’s second-largest developer. The company has another substantial payment due tomorrow and a third on September 29. The property giant missed repayments on its bank debt on Monday.

“We are still trying to understand what this payment means for the other bonds but I imagine they would want to stabilise the market and make other coupon payments, given the close scrutiny,” said an unnamed source quoted by Reuters.

Failure to make payment could lead to collapse, triggering a domino effect among suppliers and connected parties. The Evergrande situation is just one of the factors contributing to market weakness this month. The US federal government faces another shutdown if the debt ceiling is not raised this month. Republicans and Democrats are at loggerheads over corporate tax increases and infrastructure spending.

Investors also fear a repeat of the 2013 “taper tantrum” when the Fed starts to tighten monetary policy. US equity futures rallied ahead of tonight’s policy update. S&P 500 futures firmed 14 points or 0.32 per cent.

“All eyes are now glued to the results of the Federal Reserve’s policy meeting, due tonight, which is expected to provide clues on the timeline of tapering monetary stimulus,” Kalkine Group CEO Kunal Sawhney said.

“Speculations are rife that the central bank can start tapering asset purchases this year amid the surge in inflation to multi-year highs. Any reduction in bond purchases by the central bank can reduce liquidity in the global markets, paving the way for a potential rise in interest rates.  

“Having said that, it will not be surprising to see the central bank pushing back expectations for the taper timeline, considering sombre economic data amid virus concerns. Disappointing jobs report and consumer confidence data for August 2021 show that the pandemic has slammed the brakes on the American economy.” 

Winners’ circle

The major miners led the rally as the prospect of a major blow to demand for materials from China’s real estate sector appeared to diminish. Fortescue Metals climbed 4.2 per cent, Rio Tinto 2.67 per cent and BHP 2.41 per cent.

A jump in crude lifted the energy majors. Brent crude climbed 93 US cents or 1.25 per cent to US$75.29 a barrel. Woodside Petroleum rallied 2.44 per cent to a five-week high. Beach Energy gained 5.12 per cent, Oil Search 2.39 per cent and Santos 1.94 per cent.

The day’s best performers were Sims +6.14 per cent, Worley +5.56 per cent and Champion Iron +5.35 per cent. Among the heavyweights, Goodman gained 1.43 per cent, CSL 0.65 per cent and Telstra 0.51 per cent.

AGL rallied 2.9 per cent after reaffirming its full-year outlook. Chair Peter Botten told today’s AGM the company expects earnings of $220-$340 million. The company intends to split its operations into a retail business and an electricity generator.

Z1P Co improved 4.33 per cent off an eight-month low on news the BNPL firm had established  a foothold in the Indian market. Z1P will invest US$50 million in ZestMoney, a “leading Indian BNPL operator”. ZestMoney has 11 million registered users, more than 10,000 online merchants and a presence in at least 75,000 physical stores.

Doghouse

Westpac dropped 1.11 per cent after formally terminating agreements to sell its Pacific businesses to Kina Securities after the PNG regulator blocked the sale. The bank said it will continue to operate the businesses while it assesses other exit options. The proposed sale was intended to simplify the bank’s business model. Kina Securities rallied 3.55 per cent.

NAB and CBA both fell 0.7 per cent. ANZ dipped 0.22 per cent. Supermarkets Coles and Woolworths shed 0.59 and 0.28 per cent, respectively.

Virtus Health dipped 0.34 per cent flat after the Australian Competition and Consumer Commission announced plans to review the fertility services company’s acquisition of Adora Fertility and three day hospitals from Healius. Virtus said it would work with the regulator but did not expect the timing of the sale to change. Healius shares rose 0.41 per cent.

Fintech Douugh fell 3.8 per cent to an 11-month low on plans to list on the OTCBQ Venture market in the US. The firm said the listing will give it access to a deeper pool of retail and institutional investors.

Adbri fell 1.95 per cent as it traded ex-dividend.

Other markets

The Shanghai Composite index rallied 0.34 per cent as Chinese markets played catch-up with two days of turmoil during a two-day market holiday. The People’s Bank of China injected additional liquidity this morning to help calm market jitters. Trade in Hong Kong, where Evergrande is listed, was suspended for a holiday.

The Asia Dow retreated 0.55 per cent. Japan’s Nikkei shed 0.56 per cent.

Gold firmed US$1.20 or 0.07 per cent to US$1,779.40 an ounce.

The dollar bounced 0.34 per cent to 72.53 US cents.

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