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Confirmation of the strength of the nation’s mining-fuelled economic expansion helped propel the share market to fresh highs even as Melbourne extended its lockdown.
The S&P/ASX 200 hit an all-time high of 7218.9 before finishing 1.1 points lower for a tally of 75 points or 1.05 per cent.
The rally gathered pace after data showed the economy surpassed pre-pandemic levels thanks to stronger-than-expected growth over the first three months of the year.
Commodity giants Woodside, BHP and Fortescue Metals led the advance. Afterpay, CSL and Newcrest were among the largest drags on the index.
What moved the market
Cyclical stocks gained support from news the economy had entirely recovered from last year’s Covid recession. Gross domestic product increased by 1.8 per cent over the March quarter, well ahead of the 1.5 per cent anticipated by economists. Household spending on services rose 2.4 per cent as Covid restrictions were unwound.
“With 1.8% growth in the March quarter 2021, Australian economic activity has recovered to be above pre-pandemic levels and has grown 1.1% through the year,” Michael Smedes, Head of National Accounts at the Australian Bureau of Statistics, said.
Australia is one of only six countries to surpass their pre-pandemic levels, according to Deloitte Access Economics. The US and European Union economies remain smaller than they were before the outbreak. China and South Korea have expanded.
The energy and materials sectors were already setting the pace after crude hit a two-year high and iron ore regained the US$200 level. Oil surged after the Organization of the Petroleum Exporting Countries and allies stuck to a plan to increase production slowly this year in the face of growing demand. The spot price for iron ore landed in China rallied 5.2 per cent to US$209.10 a tonne amid reports of “tightness” in steel markets.
“China tried hard to jawbone the iron ore market lower after announcing a crackdown on speculation and market regularities. However, the country’s efforts appear to be insufficient in driving down the steelmaking ingredient’s prices for a prolonged period.” Kalkine Group CEO Kunal Sawhney said.
“OPEC and its allies agreed to relax curbs on oil production amid improving demand and a diminishing supply glut. OPEC’s decision to hike output in July and its buoyant forecast over a global consumption rebound appear to have retained the bull recipe for the oil market,” he added.
Woodside Petroleum climbed 4.61 per cent to a two-week high. Santos rose 6.51 per cent. BHP advanced 3.09 per cent, Fortescue Metals 2.02 per cent and Rio Tinto 1.89 per cent.
Travel and tourism stocks shrugged off news Greater Melbourne will remain in lockdown for another seven days. The Victorian government extended the lockdown after health authorities reported another six new local coronavirus cases. Restrictions on regional Victoria will ease from tomorrow night, as planned.
Flight Centre climbed 2.85 per cent, Webjet 2.94 per cent, Sydney Airport 2.74 per cent and Qantas 1.7 per cent.
US stocks closed little changed overnight as investors weighed economic optimism against inflationary concerns. The S&P 500 and Nasdaq Composite eased less than 0.1 per cent. The Dow gained 0.13 per cent.
Winners’ circle
Energy and materials were the morning’s prime movers, with later support from utilities, REITs and industrials. Origin Energy climbed 5.76 per cent, Nickel Mines 4.9 per cent, Pilbara Minerals 3.19 per cent and Whitehaven Coal 5.41 per cent.
South32 rose 1.99 per cent back towards its highest level in 20 months after completing the sale of its South African coal business to Seriti Resources and two trusts. The sale completes the company’s exit from thermal coal.
Mining services group Worley rose 6.47 per cent after outlining plans to transition to a “low-carbon future”. The company said it was well placed to “benefit from sustainability mega trend at more favorable margins”. Plans include reaching net zero emissions by 2030.
“We are actively targeting sustainability to be the largest proportion of our future revenue,” the company told shareholders at today’s Investor Day.
Scentre Group was the pick of the REITs, rising 4.09 per cent. Mirvac gained 3.57 per cent, Vicinity Centres 3.24 per cent and Charter Hall Group 2.8 per cent. Sector leader Goodman rose 1.54 per cent towards last November’s 12-year high.
Industrial powerhouse Transurban gained 1.45 per cent. Brambles added 0.37 per cent, Reece 2.89 per cent and Seven Group 1.6 per cent.
The major banks came good in late trade. CBA improved 0.87 per cent, NAB 0.56 per cent, ANZ 0.14 per cent and Westpac 0.08 per cent.
Doghouse
A retreat in the greenback weighed on businesses that generate much of their income in US dollars. CSL fell 0.36 per cent, Ansell 2.29 per cent, ResMed 1.7 per cent and Cochlear 0.75 per cent.
Tech and other growth stocks were impacted by a modest uptick in bond yields. Afterpay fell 0.9 per cent, Megaport 4.72 per cent and Technology One 2.84 per cent.
Gold stocks wobbled as the yellow metal clung above US$1,900 an ounce. Regis Resources fell 3.01 per cent, Silver Lake 1.55 per cent and Newcrest 0.21 per cent.
Infant formula maker Bubs gave back a portion of yesterday’s 22 per cent advance after telling the exchange operator the spike was likely due to a Chinese policy change. The Chinese government yesterday announced it was raising the number of children that families can have from two to three. Bubs shares eased 8.54 per cent.
Automotive software provider Infomedia unwound most of yesterday’s gains, falling 8.5 per cent.
Newly-listed KeyPath Education fell 4.31 per cent. The company helps universities deliver online learning programs.
Other markets
A mixed afternoon on Asian markets saw the Asia Dow rally 0.08 per cent and Japan’s Nikkei gain 0.47 per cent. China’s Shanghai Composite fell 0.72 per cent. Hong Kong’s Hang Seng shed 0.55 per cent.
S&P 500 futures edged up two points or 0.05 per cent.
Oil built on last night’s two-year high. Brent crude rose 35 cents or 0.5 per cent to US$70.60 a barrel.
Gold declined $4.10 or 0.22 per cent to US$1,900.90 an ounce.
The dollar faded 0.16 per cent to 77.43 US cents.
