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The first session of 2022 delivered the share market’s strongest advance in more than a year.

The S&P/ASX 200 jumped 145 points or 1.95 per cent to its biggest gain since November 2020.

All 11 sectors advanced. Macquarie Group became the first of the market giants to reach an all-time high in 2022. Green energy stocks also shone.

What moved the market

The trading year got off to a blistering start. Friday’s end-of-year 69-point sell-off looks like a blip as the last day of the “Santa rally” produced a better return than the market managed any session last year. The best day of 2021 was a 135.5-point rise on September 30.

Today’s rally was the benchmark’s seventh in eight sessions and brought it back to within 1 per cent of an all-time high. The index closed just 39 points off its August peak.

Wall Street laid the foundations for today’s advance with twin record closes for the Dow and S&P 500 overnight. The Dow climbed 0.68 per cent. The S&P 500 added 0.64 per cent.

“Optimism on global economic growth and earnings momentum reviving since mid-December continued to grow in the first day of the New Year,” Jim Paulsen, Leuthold Group chief investment strategist, told CNBC. 

The seasonal period known as the “Santa rally” ends in the US tonight. The question for investors is what comes next as institutional traders return to their desks?

 CommSec expects share market returns to moderate this year. The broker tips growth of around 5 per cent, less than half last year’s 13 per cent advance. Gains will be tempered by the withdrawal of central bank stimulus and by higher rates in the US and other parts of the world.

“We expect the Australian sharemarket to lift around 5 per cent over 2022,” the broker told clients. “Economic activity (and profits) won’t receive the same boost from fiscal and monetary stimulus as that delivered in 2021.

“Having said that, the government will not be in a rush to remove support, and super-low interest rates will remain over the majority of 2022.”

CommSec expects the economy to grow 5.1 per cent this year. Wage growth is expected to pick up by the September quarter as unemployment falls from 4.6 per cent to 4.1 per cent. The dollar should reach by 78 – 80 US cents by year-end.

Data this morning suggested the housing boom may be losing momentum. The CoreLogic Home Value Index edged up 1 per cent last month, the smallest gain in 11 months. Prices soared 22.1 per cent last year.

Winners’ circle

Green energy stocks were the day’s best performers as investors bet on strengthening demand for battery materials this year. Novonix surged 14.47 per cent. Lynas Rare Earths put on 8.46 per cent.

Lithium miners continued to break new ground. Pilbara Minerals climbed 10 per cent, Allkem (formerly Orocobre) 7.69 per cent and Liontown Resources 5.12 per cent.  

The first IPO of 2022 delivered stag profits for investors. GreenTech Metals jumped 37.5 per cent. The company aims to mine metals for use in batteries and electric vehicles.

Coal miner Whitehaven climbed 5.75 per cent to a two-month high after Indonesia halted coal exports for a month. The world’s largest exporter of thermal coal announced a temporary ban on exports as a shortage threatened to trigger blackouts.

Imugene rallied 6.25 per cent after its experimental cancer treatment passed an early-stage trial. The company hopes to develop therapies to help cancer patients eradicate tumours.

Collins Foods gained 1.94 per cent after taking over the KFC franchise in the Netherlands. The company has ambitions to “substantially grow” the brand.

Energy stocks were lifted by a rise in crude ahead of tonight’s OPEC+ policy meeting. Woodside Petroleum firmed 3.37 per cent, Santos 4.75 per cent and Beach Energy 3.57 per cent.

Banking stocks rallied as long-term lending rates followed US rates to multi-week highs. The yield on ten-year Australian government bonds hit its highest since late November.

Macquarie Group logged a record close with a rise of 2.89 per cent to $211.34. CBA tacked on 1.5 per cent, ANZ 1.78 per cent, NAB 1.94 per cent and Westpac 1.45 per cent.

Other notable gains at the heavyweight end included Aristocrat Leisure +4.18 per cent, Fortescue Metals +3.33 per cent and BHP +2.12 per cent.

Doghouse

Gold miners retreated with the yellow metal as a surging US dollar undercut demand for alternative stores of wealth. St Barbara fell 3.75 per cent, Ramelius 2.87 per cent and Regis 2.56 per cent. Nickel-copper miner Chalice dropped 7.08 per cent.

Rising rates limited interest in growth stocks. Tech leaders Appen and Altium shed 0.18 and 1.22 per cent, respectively.

Rio Tinto was the only major miner to lose ground, falling 0.8 per cent. Coles eased 0.22 per cent.

Other markets

Asian markets turned mixed in afternoon trade. The Asia Dow jumped 1.52 per cent. Japan’s Nikkei gained 1.78 per cent. China’s Shanghai Composite eased 0.35 per cent. Hong Kong’s Hang Seng gave up 0.29 per cent.

US futures turned higher. S&P 500 futures firmed nine points or 0.18 per cent.

Oil continued to improve ahead of a virtual meeting of OPEC+ tonight. Brent crude rallied 44 US cents or 0.56 per cent to US$79.42 a barrel.

Gold rebounded US$3.10 or 0.17 per cent to US$1,803.20 an ounce.

The dollar bounced 0.21 per cent to 72.1 US cents.

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