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An end-of-week rally helped the share market log a second straight weekly advance as BHP bounced off a nine-month low and crude oil rose to a one-month high.
The S&P/ASX 200 rallied 37 points or 0.5 per cent for a weekly gain of 35 points or almost 0.5 per cent.
Rises in base metals helped the major miners shrug off a drop in iron ore. Energy stocks rallied with crude. Tech stocks and some of the banks declined.
What moved the market
Fresh highs on Wall Street brought buyers back to the market after two days of selling. The market recouped most of yesterday’s loss but closed shy of Tuesday’s high-water mark for the week.
The S&P 500 and Nasdaq Composite closed at all-time highs overnight as a pandemic-era low in benefits claims bolstered optimism about tonight’s August employment report. The S&P 500 put on 0.28 per cent and the Nasdaq 0.14 per cent.
“All eyes are now glued to the key employment report due tonight, which may potentially guide on the Fed’s upcoming moves on its support for the economy,” Kalkine Group CEO Kunal Sawhney said. “Investors are curiously looking for clues on when exactly the Fed will commence winding back its massive stimulus program.”
Back home, the spotlight will swing next week to the Reserve Bank, which is under pressure to revise plans to reduce support for the economy. The bank meets on Tuesday.
At last month’s meeting, the RBA announced it intends to reduce emergency stimulus measures introduced to cushion the economy during the pandemic. However, the outlook has deteriorated sharply since. Westpac today forecast the economy will contract by 4 per cent this quarter, and called for the RBA to increase its weekly bond purchases by $1 billion.
“We have lowered our forecast for GDP growth in the September quarter from –2.6% to –4.0%,” Westpac economic spokesman Bill Evans said. “We have lowered our growth forecast in the December quarter from 2.6% to 1.6%. We have lowered our growth forecast for 2021 from 2.4% to 0%.”
While Q2 GDP data surprised to the upside this week, more recent reports underline the economic damage from extended lockdowns in NSW, Victoria and the ACT. Retail turnover slid a seasonally-adjusted 2.7 per cent in July, the biggest fall of the year. The decrease compounded a 1.8 per cent decline in June.
Construction work contracted sharply last month. The AIG/HIA Performance of Construction Index dived 10.3 points to 38.4, well below the 50-point level that separates expansion from contraction.
“Economists seem divided on the RBA’s next move on bond purchases, with some expecting the central bank to delay its bond tapering plans at a policy meeting next week,” Mr Sawhney said.
“In case the central bank announces a delay in scaling back of extraordinary monetary stimulus program, it is more likely to be spurred by a weak economic growth outlook amid lockdowns. At present, the markets appear to be shrugging off worries over a widely anticipated economic contraction in the current quarter.”
Winners’ circle
Energy was one of the best-performing sectors on both sides of the Pacific. A one-month high in crude and a firming dollar helped the Australian sector rise almost 0.8 per cent. Overnight, Brent crude firmed 2 per cent following a sharp drop in US crude stockpiles.
“Confidence that the market will continue to see inventories drawn down saw crude oil prices extend recent gains,” commodity strategist Daniel Hynes of Hynes Commodities said.
“Nearly 94% of Gulf of Mexico crude production remains shut days after Hurricane Ida. This represents around 1.7mb/d of crude. While most oil refiners escaped major damage, they are likely to be offline for several weeks.’
Santos climbed 0.64 per cent, Woodside Petroleum 0.76 per cent and Beach Energy 0.93 per cent.
Rebounds in base metals helped the big three miners look past a two-week low in iron ore. Rio Tinto advanced 2.5 per cent, BHP 0.98 per cent and Fortescue Metals 0.68 per cent.
Mineral sands miner Iluka climbed 2.67 per cent to an all-time high. Coal miner Whitehaven advanced 4.89 per cent to a pandemic-era peak. Also strong were Alumina +6.68 per cent, Orocobre +6.99 per cent, Whitehaven Coal +6.77 per cent and Mineral Resources +2.65 per cent.
CSL bounced 0.14 per cent from yesterday’s post-dividend decline. A strong session for the health sector saw ResMed rally 1.13 per cent, Cochlear 2.07 per cent, Ramsay Health Care 3.12 per cent and Sonic 1.18 per cent. Biotech Mesoblast continued to heal from a post-earnings plunge, rising 5.88 per cent.
Software-as-a-service provider Technology One rallied 3.55 per cent on news it acquired UK outfit Scientia for £12 million ($22.45 million). Scientia provides timetabling and resource scheduling to British universities.
The speculative end of the market extended its win streak into a fifth session. The S&P/ASX 200 Emerging Companies index climbed 2.1 per cent to a new high. The index has put on 11 per cent in two weeks, significantly outperforming the wider market.
Doghouse
The tech sector trimmed three days of gains. Afterpay retreated 2.77 per cent, Xero 1.22 per cent and Nearmap 1.9 per cent.
Automotive aftercare specialist AMA Group slumped 5.62 per cent to a 15-month low after confirming media reports it was reviewing its options to manage the hit from Covid-19. The company said repair volumes had declined but its cash and debt position remained strong.
The banks were mixed. Slender declines in ANZ (-0.14 per cent) and Westpac (-0.04 per cent) were offset by rises in CBA (+0.46 per cent) and NAB (+0.74 per cent). Macquarie Group put on 0.67 per cent.
Other markets
Asian markets turned mixed after lunch. The Asia Dow rallied 0.71 per cent and Japan’s Nikkei surged 2.06 per cent. China’s Shanghai Composite dropped 0.18 per cent and Hong Kong’s Hang Seng 0.68 per cent.
US futures firmed ahead of tonight’s employment data. S&P 500 futures climbed nine points or 0.2 per cent.
Oil added to its one-month high. Brent crude edged up seven US cents or 0.1 per cent to US$73.10 a barrel.
Gold climbed US$3 or 0.17 per cent to US$1,814.50 an ounce.
The dollar rose 0.38 per cent to 74.25 US cents.
