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A late fade denied the share market its longest winning run since its August all-time high after the Reserve Bank reaffirmed its commitment to low rates for years to come.

The S&P/ASX 200 shed six points or almost 0.1 per cent in the closing auction after earlier rising 26 points. The final-hour retreat cruelled a fourth straight advance.

Rio Tinto led a retreat in the mining majors following soft Chinese and US factory reports. BHP fell after shipping less ore last quarter. Rate-sensitive growth stocks and bond proxies bucked the downtrend.  

What moved the market

An optimistic outlook from the RBA temporarily helped convince buyers there was value left in the share market. The minutes from this month’s meeting showed the bank expects a solid economic rebound as lockdown restrictions ease. Employment is tentatively anticipated to regain pre-Delta levels before year-end.

“The lifting of restrictions in New South Wales and Victoria was expected to lead to a solid recovery in household consumption in the December 2021 and March 2022 quarters,” the minutes said.    

“Members noted that the central forecast scenario envisaged the level of employment, unemployment and participation to have broadly recovered to pre-Delta levels by around the end of the year, although there was considerable uncertainty around this projection,” they added.

Financial markets have already decided rates will be a lot higher by 2023, but the Reserve Bank does not see it. The bank stuck to its long-term guidance that the inflation and employment conditions for raising the cash rate will not be met until 2024. Its stance put it at odds with implied rates, which indicate the cash rate will reach 1 per cent by the end of 2023.

“If there is any criticism of the Reserve Bank (RBA) Board, it is that its views tend to be more optimistic than pessimistic,” CommSec chief economist Craig James said. “That observation was made by some observers after the Bank released its last quarterly forecasts made on August 6. But the Bank also has a healthy knack of proving its critics wrong.”

The yield on ten-year Australian bonds briefly fell almost three basis points before reversing to a gain of two points. The dollar firmed 0.6 per cent to 74.56 US cents.

Today’s choppy session followed mixed overnight leads in the wake of soft manufacturing updates from China and the US. Strength in tech stocks lifted the S&P 500 0.34 per cent and the Nasdaq 0.84 per cent. The Dow dipped 0.1 per cent.

Winners’ circle

The RBA’s mantra of ‘low rates for longer’ encouraged buyers into growth stocks and bond proxies. Goodman Group rallied 2.32 per cent, Afterpay 2.68 per cent, Wesfarmers 1.31 per cent and Coles 0.56 per cent.

Macquarie Group rose 0.93 per cent to a new all-time high. The high-street banks gave up their gains in the final hour. CBA dipped 0.05 per cent, ANZ 0.32 per cent, NAB 0.49 per cent and Westpac 0.39 per cent.

A 9 per cent lift in sales revenue over the first quarter helped raise Brambles 0.2 cent. The global logistics specialist’s pallets business saw price growth in Europe, increased demand in Australia and a mixed performance in North America. The company expects growth to moderate to 5-7 per cent over the full year.

Hearing implant specialist Cochlear climbed 1.88 per cent after reaffirming a full-year target of growing underlying net profit by 12-20 per cent. Surgery rates are expected to improve in countries affected by Covid-19.

Bapcor climbed 1.99 per cent after tipping a strong second half will offset a weak start to the financial year. The automotive parts business aims to match last year’s pro forma earnings, despite the impact of lockdowns on costs and margins.  

Diversified property group Stockland reaffirmed full-year guidance, but expects much of the heavy lifting to happen in the second half. Residential net sales volumes increased 8 per cent last quarter over 1Q21. However, retail rent collection continued to be impacted by the pandemic. The share price improved 0.22 per cent.

Doghouse

BHP fell 2.04 per cent after reporting a 4 per cent decline in iron ore shipments last quarter. The miner attributed the drop to maintenance and rail labour shortages due to border restrictions. The company reaffirmed its full-year production guidance.

Rio Tinto shed 3.25 per cent after losing its long-term head of strategy and development. Fortescue Metals dropped 1.22 per cent. Other heavyweight drags included Woodside -1.15 per cent, Telstra-1.03 per cent and Transurban -0.87 per cent.

A 7.3 per cent drop in Q1 group revenues helped pull Tabcorp down 2.68 per cent. The gaming group said wagering and media revenues were impacted by lockdown closures, but punters in NSW were returning to pubs, clubs, TABs and racetracks. The group aims to completed the process of demerging its wagering and lotteries divisions by June next year.

Franchisor Retail Food Group sagged 4.71 per cent on news of a class action by a former franchisee. The company said the proceedings related to the operation of the Michel’s Patisserie brand under former leadership. The action will be defended.

Beleaguered casino group Star Entertainment eased 0.27 per cent after announcing it had bought itself breathing space by securing debt waivers from its lenders. Two law firms are exploring class actions against the group in relation to its compliance with anti-money laundering and anti-terrorism legislation. The company said it will defend any proceedings.

Other markets

Asian markets built on tentative morning gains. The Asia Dow put on 0.53 per cent, Hong Kong’s Hang Seng 1.18 per cent, Japan’s Nikkei 0.64 per cent and China’s Shanghai Composite 0.7 per cent.

S&P 500 futures were broadly flat, down a point or 0.02 per cent following reports China’s troubled Evergrande Group had suspended negotiations over the sale of a stake in its property services group.

Oil pared its overnight loss. Brent crude edged up eight US cents or 0.1 per cent to US$84.41 a barrel.

Gold reversed last night’s fall, rising US$9.50 or 0.54 per cent to US$1,775.20 an ounce.

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