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A rally in cyclical stocks best placed to benefit from a recovery in the economy lifted the share market to its highest close in almost a year.

The S&P/ASX 200 climbed 48 points or 0.7 per cent to 6917, the index’s strongest finish since February 25 last year.

What moved the market

Well-received trading updates from BHP and NAB helped bolster confidence in the improving economic outlook. Traders bought energy, mining and industrial companies that have yet to regain pre-pandemic levels.

ThinkMarkets analyst Carl Capolingua said the market was “getting a boost on the belief that stronger economic growth is going to more than compensate investors (though higher company earnings) for the potential negative impacts of higher inflation (higher interest rates being one of those).

“Investors are targeting value and cyclical stocks like banks, retail, and commodity stocks like energy and minerals,” he added. “It’s all about macro-fund flows, cheap money, and bullish sentiment. If we can catch a ride on the broader global moves, the chart of the S&P ASX 200 suggests we’re poised for a substantial break higher here.”

BHP led a rally in mining stocks after announcing a 16 per cent increase in underlying profits and a record half-year dividend. The board raised the interim dividend to US$1.01 per share after underlying profits climbed to $6.036 billion amid a boom in raw materials. Shares in the Big Australian climbed 2.7 per cent to a three-week high. Rio Tinto, which reports tomorrow, rallied 3 per cent. Fortescue Metals reversed to a loss of 3 per cent after the departure of three senior executives following a review of the company’s Iron Bridge magnetite project.

Positive signals from US futures ensured the market closed at a session high. S&P 500 futures rose 26 points or 0.7 per cent ahead of the resumption of trade following last night’s President’s Day market holiday. Dow futures advanced 244 points or almost 0.8 per cent.

The minutes from this month’s Reserve Bank policy meeting underlined the likelihood of record-low interest rates for years to come. At the meeting, the bank left the cash rate at 0.1 per cent.

“Members concluded that very significant monetary support would be required for some time, as it would be some years before the Bank’s goals for inflation and unemployment were achieved. Given this, it would be premature to consider withdrawing monetary stimulus,” the minutes said.

Winners’ circle

A flat quarter was enough to lift NAB 1.1 per cent to its highest level in almost a year. Statutory net profit was steady at $1.7 billion. Cash earnings were 47 per cent stronger than the first half of FY20. CEO Ross McEwan said the outlook was muddied by health alerts and the impact of winding down JobKeeper.

ANZ and Westpac followed to 50-week peaks, rising 1 and 0.5 per cent, respectively. Commonwealth Bank retreated 0.3 per cent as it traded without its dividend.

A 13-month high in crude lifted oil producers. Woodside put on 2.3 per cent and Santos 1.7 per cent.

Beyond the resources and financial space, toll road operator Transurban tacked on 4.4 per cent, Goodman Group 0.7 per cent and Brambles 0.2 per cent.

CSL rallied 2 per cent after the Therapeutic Goods Administration granted provisional approval to AstraZeneca’s Covid vaccine. CSL will manufacture the vaccine in Melbourne.

The ASX 200’s best performers were Seven West Media, up 16 per cent after striking a content deal with Google, and Z1P Co, up almost 10 per cent to a record as the BNPL sector continued to run hot.

A swing back to profitability lifted metals recycler Sims 7.4 per cent. Improvements in margins and prices, plus lower costs, contributed to a $53 million half-year net profit.

Strong demand for personal protective equipment helped Ansell lift profits by 61.3 per cent to US$106.5 million. The company boosted its interim dividend from 21.75 cents last year to 33.2 cents. Shares rose 1.8 per cent.

A rebound in IVF treatments helped Virtus Health double its half-year profit to $29 million. Shares in the company rallied 2.3 per cent.

Doghouse

Consumer stocks struggled following a mixed bag of trading updates. Redbubble slumped 18.1 per cent despite almost doubling revenue to $417.6 million as the online marketplace delivered a net profit of $41 million. Breville gained 2.8 per cent despite cutting its dividend.

Fixtures and fittings supplier GWA was the worst performer on the wider market, falling 8.1 per cent after reporting a 17 per cent decline in half-year net profit to $20 million.

The biggest drag on the consumer staples sector was an unexplained dive in Treasury Wine Estates. Shares in the Penfolds maker tumbled as much as 12 per cent before paring their fall to 2.5 per cent. The company is due to deliver its half-year result tomorrow.

Online property listings group Domain Holdings hit a record this month, but retreated 3 per cent today after dashing dividend expectations. The company deferred any dividend until its full-year result despite a 52.2 per cent increase in half-year net profit to $19.4 million.

Adairs faded 3.8 per cent after reporting a 233 per cent surge in net profit to $43.9 million. The decline came after the furniture retailer announced it would repay $6.1 million in JobKeeper payments.

Beach Energy slipped 2.1 per cent following a broker downgrade from Goldman Sachs in the wake of yesterday’s profit disappointment.

Besides Fortescue and Commonwealth Bank, the heaviest drags at the big end of the market were Newcrest -1.4 per cent, Afterpay -0.5 per cent and Coles -0.4 per cent.

Other markets

The positive mood extended into Asia, where Japan’s Nikkei added 1.88 per cent and Hong Kong’s Hang Seng 1.8 per cent. Chinese markets remained closed for the Lunar New Year.

Oil added to last night’s 13-month high. Brent crude improved 33 cents or 0.5 per cent to $US63.63 a barrel. Gold inched up $2 or 0.1 per cent to $US1,825.20 an ounce.

The dollar climbed 0.24 per cent to 78.03 US cents.

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