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Aussie shares surged to a three-week high as regional markets rallied on signs global inflationary pressures may have peaked and as China relaxed Covid restrictions.

The S&P/ASX 200 climbed 101 points or 1.41 per cent to 7284.

Tech and speculative stocks outperformed, a hallmark of improving risk appetite. Utilities, a traditional defensive haven, was the only sector to sit out the upswing.

Infant formula maker Bubs jumped 40 per cent after US President Joe Biden tweeted news of an import deal. AGL fell after the architects of a demerger plan stood down in the face of market opposition to the proposal.

What moved the market

A regional rally powered the ASX 200 its strongest close since May 6. Positive leads from Wall Street were bolstered by signs recent Covid outbreaks in Chinas had been contained.

Beijing allowed parks, gyms and cinemas to reopen yesterday. Restrictions on shops and offices were also eased. Shanghai announced tax breaks and subsidies to support the city’s businesses after two months of lockdowns.

“This round of outbreak has been put under effective control,” Beijing spokesperson Xu Hejian said.

The news helped lift Hong Kong’s Hang Seng index 1.82 per cent and the Shanghai Composite 0.47 per cent. The Asia Dow put on 2.2 per cent. In Japan, the Nikkei 225 index gained 2.24 per cent.

Wall Street laid the foundations for today’s advance with a strong rally as cooling consumer prices bolstered hopes inflation has peaked. The Federal Reserve’s preferred measure eased for a second straight month.

The Dow climbed 1.76 per cent to secure a weekly advance of 6.2 per cent and end its worst run of weekly declines since 1932. The S&P 500 gained 2.47 per cent for the session and 6.5 per cent for the week.

The improvement in risk appetite was underscored here by buying interest in the more speculative end of the market. The technology sector popped 4.6 per cent. The S&P/ASX Emerging Companies Index outpaced the broader market with a rise of 2.3 per cent. Utilities – arguably the most stable, lowest-growth sector – fell 0.7 per cent.

The market held its gains through to the close ahead of a US market holiday. The New York Stock Exchange, Nasdaq and other markets shut tonight for Memorial Day.

Winners’ circle

Tech stocks led as the cost of long-term borrowing continued to back off seven-year highs. The yield on ten-year Australian government bonds was this afternoon trading around 3.25 per cent after nearing 3.6 per cent earlier this month.

Afterpay parent Block climbed 10.89 per cent. Novonix added 10.99 per cent, Megaport 8.57 per cent and Xero 5.2 per cent. Tyro Payments put on 10.19 per cent and Zip Co 14.04 per cent.

Dairy stocks surged after the US regulator fast-tracked six of Australian producer Bubs’ products to help with a nationwide baby formula shortage. Bubs jumped 40.21 per cent. The company said it had 500,000 tins ready for immediate export, with another 750,000 tins in production.

A2 Milk gained 10.42 per cent. Australian Dairy Group climbed 38.17 per cent. Bega Cheese tacked on 2.56 per cent.

James Hardie was the best of the heavyweights, rising 5.26 per cent. Macquarie Group gained 2.8 per cent, Goodman 2.67 per cent and Woolworths 2.22 per cent. Mining giants BHP, Rio Tinto and Fortescue Metals added between 1.3 and 2.8 per cent.

ANZ shrugged off news the Australian Securities and Investments Commission launched civil proceedings relating to alleged misleading credit card balances. The share price ticked up 0.35 per cent.

nib Group edged up 0.68 per cent after postponing an increase in health insurance premiums for another two months. The company said the extension would “support members impacted by the COVID-19 pandemic”.

DGO Gold added 3.46 per cent after Gold Road Resources sweetened its takeover offer. Gold Road raised its offer from 2.16 Gold Road shares for every DGO share to 2.25 shares. Gold Road shares rose 4.23 per cent.

Liontown Resources firmed 5.3 per cent after the lithium miner confirmed offtake negotiations were continuing with Tesla. The companies agreed to extend the termination date for an agreement to June 6.

Australian Unity Office Fund jumped 10.96 per cent following a takeover offer from Sydney-based property company Aliro Group. The offer at $2.45 per share has the support of AOF’s largest unitholder, Hume Partners.

Doghouse

AGL fell 1.69 per cent as the failure of a demerger plan prompted a clear-out at the top of the company. Chair Peter Botten, CEO and Managing Director Graeme Hunt and two other directors will stand down after the energy giant withdrew a proposal to split in two.

The company said the demerger proposal was unlikely to meet the 75 per cent approval threshold to proceed in the face of opposition from Mike Cannon-Brookes’ Grok Ventures and other investors. A strategic review will be launched to consider the company’s next step.

Yancoal slumped 7.57 per cent on confirmation majority shareholder Yankuang Energy was exploring acquiring any shares it does not own at a discount to Friday’s last traded price. The proposed offer values Yancoal at $5.07 a share. A successful bid would lead to the delisting of the miner’s shares.  

Elders dropped 2.73 per cent as its shares traded without the right to the latest dividend payment.

Other markets

US futures rallied ahead of tonight’s market holiday. S&P 500 futures were recently ahead 31.5 points or 0.76 per cent.

Oil built on Friday’s two-month high. Brent crude climbed 78 US cents or 0.67 per cent to US$116.34 a barrel.

Gold strengthened US$8.80 or 0.5 per cent to US$1,860.10 an ounce.

The dollar extended last week’s gains, rising 0.34 per cent to 71.83 US cents.

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