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The share market’s longest weekly win streak ended at five despite a tentative rebound today after Wall Street hit a new high and parts of Sydney went into lockdown.
The S&P/ASX 200 rallied 33 points or 0.45 per cent to trim its loss for the week to 61 points or 0.8 per cent. This week’s decline broke a run of advances that stretched back to mid-May and included a string of record closes last week.
The big banks and miners advanced in lockstep to ensure a positive end to a disappointing week. The rebound was kept in check by declines in Woolworths, CSL and Afterpay.
What moved the market
The last full week before the end of the financial year started with a plunge and never truly recovered. The interest rate-rise worries that rattled Wall Street last week crossed the Pacific as Commonwealth Bank and Westpac both predicted the RBA will be forced to lift the cash rate well ahead of current guidance.
Also affecting sentiment was the lingering threat of a full lockdown in New South Wales as the Bondi Covid-19 cluster expanded. The state government today announced stay-at-home orders for four Sydney local government areas closest to the outbreak. The partial lockdown came after health authorities reported 22 new cases since yesterday’s update.
“This is in order for us to ensure that this doesn’t take a hold for weeks and weeks and we believe this is a proportionate response to the risk,” NSW Premier Gladys Berejiklian said.
US stocks probed fresh highs overnight after the White House declared it had bipartisan support for a trimmed-down infrastructure spending package. The S&P 500 climbed 0.58 per cent.
The financial year ends next week, prompting investors to examine their portfolios for possible sales. Kalkine Group CEO Kunal Sawhney said investors should weigh the pros and cons before making hasty decisions to reduce their tax bills.
“The tax-loss selling hypothesis may influence stock price behaviour during the month-end as the end of the fiscal year is just around the corner,” he said. “We have seen how at times investors opt to sell loss-making shares prior to the end of the financial year to minimise any taxable profits made on selling shares.
“Investors willing to reap the rewards of this tax loophole should bear in mind that long-term capital losses can be best set-off against long-term capital gains rather than short-term capital gains. And short-term capital losses can be best set-off against both long-term and short-term capital gains.
“While tax harvesting is a good technique to save taxes, funds should be invested immediately after the gains are booked to harness the benefits of strategy.”
Winners’ circle
Boral jumped 6.38 per cent to $7.34 after major shareholder Seven Group lifted its takeover offer for the shares in the company it does not already own. Seven lifted its offer to $7.30 per share from $6.50 on condition it secures 29.5 per cent of the firm by July 2. The offer price will rise to $7.40 if Seven secures 34.5 per cent of the share on offer by July 7. Seven Group shares slid 2.64 per cent.
Westpac edged up 0.23 per cent after Chair John McFarlane signalled the bank will return capital to shareholders as it reduces costs and exits non-core businesses. Mr McFarlane said the bank aimed to reduce costs by a third from more than $12.6 billion this year to $8 billion by 2024.
“Cash earnings improved significantly [in the first half], and we have materially increased our financial strength. This will be enhanced further as capital is released from the disposal of our non-core businesses. Our excess capital and franking credit position should enable the Board, at the appropriate time, to consider a return of capital to shareholders,” he said.
Macquarie Group climbed 1.63 per cent to a six-week high. CBA gained 0.62 per cent, ANZ 0.86 per cent and NAB 0.34 per cent.
Newcrest shrugged off an overnight reversal in gold, rising 1.63 per cent. BHP put on 0.63 per cent, Rio Tinto 0.69 per cent and Fortescue Metals 0.79 per cent.
Travel stocks shrugged off news off a limited lockdown in Sydney. Corporate Travel Management climbed 2.14 per cent, Qantas 2.16 per cent and Sydney Airport 1.38 per cent.
Flight Centre climbed 0.2 per cent, rising for the first time in four sessions after unveiling a program to retain sales and support staff during the challenging Covid recovery. Staff will be incentivised through share rights. The program was expected to cost around $30 million.
Endeavour Group climbed 1.33 per cent on its second day on the boards. The drinks business which owns the Dan Murphy’s and BWS brands, as well as hundreds of pubs and pokie machines, was spun out of Woolworths yesterday. Woolworths shares eased 2.57 per cent.
Media group Southern Cross jumped 6.53 per cent on news of a deal to broadcast Network 10’s channels in regional Queensland, southern NSW and regional Victoria for two years from July 1.
Doghouse
CSL has been one of the biggest drags on the index this week, falling another 0.52 per cent this session towards a fifth straight loss. Brokers have downgraded their ratings on the health giant since it reached a seven-month peak last week.
Pilbara Minerals, one of the week’s standouts, eased 3.88 per cent from record levels after announcing plans to restart its Ngungaju plant in the December quarter. The company also announced it expected to achieve record spodumene concentrate shipments this quarter.
Coal miner New Hope shed 7.61 per cent after raising $200 million through a convertible note offering. The notes, which mature in July 2026, have a conversion price of $2.10, a 25 per cent premium to the reference share price.
BNPL players mostly took a breather at the end of a strong week. Afterpay fell 1.15 per cent. Z1P Co dipped 3.06 per cent. Sezzle climbed 6.62 per cent.
“The shares of BNPL juggernaut Afterpay Limited have demonstrated extraordinary signs of strength this week, launching from AU$113.89 on Monday to over AU$130 at present,” Kalkine’s Mr Sawhney said.
“Afterpay has been leveraging the benefits of a marked shift in consumer behaviour towards online shopping, digital banking, and no-touch payments during the pandemic. The recent expansion of its BNPL service to some of the largest online brands in the US seems to have given its share price an additional shot in the arm.
“BNPL players like Zip Co Ltd and Sezzle have also staged a strong comeback this week, witnessing substantial share price gains.”
Other markets
US futures rallied with Asian markets. S&P 500 futures firmed six points or 0.14 per cent. The Asia Dow put on 0.7 per cent, China’s Shanghai Composite 1.13 per cent, Hong Kong’s Hang Seng 1.27 per cent and Japan’s Nikkei 0.63 per cent.
Gold rebounded $3 or 0.17 per cent to US$1,779.70 an ounce. Brent crude advanced 13 cents or 0.17 per cent to US$74.94 a barrel.
The dollar rose 0.16 per cent to 75.94 US cents.
