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A lacklustre trading week drifted to a downbeat conclusion as investors awaited Wall Street’s response to US President-elect Joe Biden’s US$1.9 trillion coronavirus relief plan.

The S&P/ASX 200 closed dead flat, finishing at its session low following a slow decline in US futures.

The index shed 42.5 points or 0.6 per cent for the week, continuing a pattern of sideways drift through the holiday season. Today’s close was roughly where the index finished a month ago.

What’s driving the market

Mining and tech stocks led today’s advance, offsetting declines in bond proxies. Sector leaders BHP and Afterpay hit all-time highs.

BHP rallied 1.7 per cent to a record after iron ore rose overnight in anticipation of the stimulatory effects of the incoming president’s spending plans. Strategists at JP Morgan Chase today recommended investors increase their exposure to commodities for a cyclical recovery this year.

Afterpay surged 10 per cent as investors reassessed its market value following the spectacular debut of Affirm. Afterpay’s largest US rival soared 98 per cent upon listing on the Nasdaq this week.

“The success story of Afterpay deserves closer attention here,” Kunal Sawhney, CEO of Kalkine Group, said. “ASX market darling displayed tremendous recovery from $8.90 in March 2020 crash to over $120 in December 2020. The BNPL sector is further gathering momentum post successful market debut of Afterpay’s US competitor Affirm.”

ASX gains were kept in check by a downward drift in US futures after Biden released details of his ‘American Rescue Plan’. The proposed legislation includes: increased direct payments of US$2,000 to most Americans; a rise in the minimum wage; higher unemployment benefits extended until September; US$350 billion for state and local governments; and US$70 billion for testing and vaccination. A second bill in February will tackle longer-term goals, according to CNBC.

“The concern is what it’s going to mean from a tax standpoint,” Tim Ghriskey, chief investment strategist at Inverness Counsel, told Reuters. “Spending is easy to do but the question is how are you going to pay for it? Markets often ignore politics but they don’t often ignore taxes.”

S&P 500 futures rose initially, then faded 12 points or 0.3 per cent. Overnight, the S&P 500 shed 0.38 per cent.

Going up

The rise in Afterpay single-handedly lifted technology to the top of the sector gains. Link Administration Holdings was the only other top ten tech stock to advance, edging up 0.4 per cent. Xero dipped 1.5 per cent and WiseTech 2.5 per cent.

Iron ore majors Rio Tinto and Fortescue Metals chased BHP with gains of 0.7 and 1.7 per cent, respectively. The price of ore climbed 1.4 per cent overnight to US$171.45 a tonne.

Westpac rose for a seventh straight session, climbing 1.5 per cent to join CBA and ANZ near post-March peaks. NAB rose 1.5 per cent and ANZ 0.2 per cent. CBA dropped 1.1 per cent.

The promise of receiving a deferred dividend payment helped lift jeweller Michael Hill 7.4 per cent. The retailer said it would pay shareholders this month the FY20 interim dividend originally due to have been paid last March. The company said it had seen significant earnings growth over the last quarter.

Going down

A rise in US bond yields dulled interest in traditional stock alternatives. Health giant CSL sank 1.4 per cent, Goodman Group 1.1 per cent, Wesfarmers 1.1 per cent, Coles 0.5 per cent and Woolworths 0.4 per cent.

Gold stocks struggled following modest down-pressure on the precious metal overnight. Gold for February delivery settled $3.50 or 0.2 per cent lower at US$1,851.40 an ounce.

A production miss dragged Resolute Mining down 7.8 per cent. The gold miner said last quarter’s volumes were slightly below guidance. Silver Lake Resources and Gold Road Resources both dipped 2 per cent. Newcrest finished flat.

Other markets

Asian markets mostly tracked US futures lower. China’s Shanghai Composite fell 0.5 per cent. Japan’s Nikkei shed 0.4 per cent. Hong Kong’s Hang Seng gave up early gains to trade flat.

Gold shook off early weakness to rise $1.50 or 0.1 per cent to $US1,852.90 an ounce. Brent crude eased 18 cents or 0.3 per cent to $US56.24 a barrel.

The dollar declined 0.11 per cent to 77.66 US cents.

What’s hot today and what’s not

Hot today: The lithium sector has been running hot in expectation demand for the battery component is going to increase exponentially over the next decade. Vulcan Energy (ASX:VUL) lit up the boards after releasing the maiden resources for its European licences.  The share price jumped 29.1 per cent to an all-time high. Shares that traded near $1 in November hit $7.20 this morning before easing to $6.44. Lithium Australia (ASX:LIT) jumped 25.3 per cent and Piedmont Lithium (ASX:PLL) 20 per cent.

Not today: The hits keep coming for beleaguered EFTPOS provider Tyro Payments (ASX:TYR). The share price dived 11.8 per cent to a nine-month low after shortseller Viceroy Research claimed connectivity issues with Tyro’s terminals were more widespread than the company had admitted. Viceroy said around 50 per cent of terminals were offline, significantly more than the 30 per cent acknowledged by Tyro. Shares in Tyro went into a trading halt mid-morning, pending an announcement. The company accused Viceroy of making “false assertions” and promised an update next week.   

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