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A two-month high for the materials sector propelled the stock market into positive territory for the week following improvements in economic activity and consumer confidence.

The S&P/ASX 200 rallied 57.5 points or 0.78 per cent to its highest close in a week.

The mining heavyweights surged amid signs of a turnaround in Chinese steel demand. Bank stocks rose with lending rates. The tech sector fell to its lowest in a month.

What moved the market

Cyclical stocks reversed yesterday’s sell-off as Europe’s lockdown panic was superseded by strong domestic economic data and a rebound in iron ore.

Chinese ore futures traded limit up this afternoon, surging for a third session. Buying interest has sharpened since Mysteel reported a 4.2 per cent jump in Chinese demand for steel products last week as ore prices hit 18-month lows. “Limit up” means prices rose 10 per cent, the maximum rise allowed by the exchange.

Fortescue Metals flew up 9.81 per cent to a two-month high. BHP put on 4.02 per cent, Rio Tinto 3.6 per cent, Mineral Resources 4.93 per cent and Champion Iron 8.04 per cent.

Also helping soothe nerves after yesterday’s three-week closing low, were a rebound in consumer confidence and a five-month high in business activity. The weekly ANZ-Roy Morgan consumer confidence index climbed 1.3 per cent to 107.4. Worries about inflation retreated from a six-and-a-half-year high.

Preliminary figures showed a post-lockdown economic recovery gathered pace this month. The composite IHS Markit Purchasing Managers’ Index rose to 55 from an October reading of 52.1. Readings above 50 indicate expanding activity.

“The Australian economy grew at a faster pace in November,” IHS Market economists wrote. “This is reflective of the positive effects from the continued easing of COVID-19 restrictions and decline in new cases. The rate of expansion picked up to a five-month high.”  

The market took in its stride underwhelming leads from Wall Street. An exuberant initial reaction to the renomination of Jerome Powell as Federal Reserve Chair gave way to a late sell-off.

The Dow finished just 17 points or less than 0.1 per cent ahead after being up more than 300 points. The S&P 500 and Nasdaq Composite both closed lower after touching all-time highs.

Winners’ circle

Woodside jumped 3.46 per cent after finalising a deal to merge with BHP’s oil and gas business. Under the terms of the deal, Woodside will acquire all of the share capital of BHP Petroleum International in exchange for new Woodside shares. The energy giant also announced it had greenlit the Scarborough and Pluto Train 2 LNG developments in WA.

“Developing Scarborough delivers value for Woodside shareholders and significant long-term benefits locally and nationally, including thousands of jobs, taxation revenue and the supply of gas to export and domestic markets for decades to come,” CEO Meg O’Neill said.

CBA climbed 1.06 per cent off a six-month low on the promise of improved margins as borrowing costs rise. The yield on ten-year Australian government bonds jumped eight basis points this afternoon to 1.89 per cent in response to a US yield rally. ANZ tacked on 1.91 per cent, NAB 0.85 per cent and Westpac 0.6 per cent.

Telstra edged up 0.25 per cent to a four-year high. Transurban gained 2.27 per cent, Woolworths 0.79 per cent, Wesfarmers 0.49 per cent and CSL 0.31 per cent.

The announcement of a share buyback lifted mortgage insurer Genworth 5.96 per cent. The company will buy back up to 11.1 per cent of its issued share capital up to a maximum aggregate value of $100 million.  

Link Group edged up 0.61 per cent after reaffirming full-year guidance of low single-digit growth. The administration services provider is fielding takeover proposals for all or part of the company from Carlyle Group and LC Financial Holdings.  

Investment manager Pinnacle entered a trading halt for a capital raise to fund the purchase of a 25 per cent stake in private-equity firm Five V Capital. Pinnacle said the Australian equity firm had a proven track record of investment excellence.

Doghouse

The rate-sensitive tech sector dived 3.5 per cent to a four-week low. Tech stocks are particularly vulnerable to rising borrowing costs because of the way analysts value their future earnings.

WiseTech skidded 5.63 per cent, Afterpay 5.37 per cent and EML Payments 5.56 per cent. Appen shed 3.47 per cent, NextDC 5.21 per cent and Xero 3.46 per cent.

Technology One fell 2.86 per cent despite hitting the upper end of full-year profit guidance and increasing its dividend by 8 per cent. The software developer lifted profit before tax by 19 per cent to $97.8 million. The company predicted recurring revenues will grow at a minimum of 15 per cent per annum by FY24.

Gold stocks were the session’s other major drag following the yellow metal’s biggest setback in three and a half months. Ramelius gave up 4.78 per cent, Silver Lake Resources 5.6 per cent and Newcrest 0.57 per cent.

Northern Star dipped 2.68 per cent after agreeing to acquire Newmont’s Australian power business for US$95 billion. The miner said the acquisition would reduce power costs at its Kalgoorlie gold operations.

Generic drugmaker Mayne Pharma sagged 3.23 per cent after CEO Scott Richards declined to offer a trading update at today’s AGM. Scott said year-to-date trading was “not reflective of the expectations we have for the remainder of this half and the rest of the financial year”. A “mixed” start to trading was expected to improve.

News of the departure of long-serving CEO and Managing Director Darryl Abotomey sent shares in automotive aftercare specialist Bapcor down 9.58 per cent. Abotomey headed the company for a decade, guiding it through its listing in 2014.   

Other markets

Another mixed session on Asian markets saw the Asia Dow ease 0.39 per cent and Hong Kong’s Hang Seng lose 1.01 per cent. China’s Shanghai Composite gained 0.43 per cent. Trade in Japan was suspended for a public holiday.

S&P 500 futures traded neutral at the Australian close, up a quarter of a point or 0.01 per cent.

Brent crude faded 36 US cents or 0.45 per cent to US$79.34 a barrel.

Gold rebounded US$1.60 or 0.1 per cent to US$1,807.90 an ounce.

The dollar faded 0.1 per cent to 72.2 US cents.

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