ASX Close: Market lifted by Chinese rate cuts, US futures

The share market bounced off its weakest level of 2022 as unemployment fell to a 13-year low and mining stocks rallied.

The S&P/ASX 200 dipped below 7300 for the first time this year before coming good in afternoon trade. The benchmark finished with a gain of ten points or 0.14 per cent at 7342.

Newcrest and other gold miners surged after gold hit a two-month high. Weak leads from Wall Street ensured just four of eleven sectors advanced.

What moved the market

Investors had plenty of meat to digest this session, including a 13-year low in Australian unemployment, lending rate cuts in China and a fourth night of falls on Wall Street.

The ASX 200 retested 7300 before finishing well off session lows as rising US equity futures stoked hopes of US gains tonight. S&P 500 futures were 20 points or 0.44 per cent ahead as Australian trade ended.

The ASX hit its weakest point after unexpectedly strong December jobs data increased pressure on the Reserve Bank to raise the cash rate. The unemployment rate fell to 4.2 per cent last month, the lowest reading in more than 13 years.

Economists had predicted a smaller drop from 4.6 per cent in November to 4.5 per cent. The economy added 64,800 new jobs. The dollar rallied 0.27 per cent to 72.37 US cents.

“This is the lowest unemployment rate since August 2008, just before the start of the Global Financial Crisis and Lehman Brothers collapse, when it was 4.0 per cent,” Bjorn Jarvis, head of labour statistics at the ABS, said.

Westpac and AMP both tipped rates to rise in August.

“Given the far stronger than expected underlying labour market strength we have decided to bring forward our forecast for the first rate hike from November to August (which will be a 0.15% hike to 0.25%) followed by a second 0.25% hike in Sept,” AMP economist Shane Oliver tweeted.

Westpac’s highly-regarded chief economist Bill Evans said the Omicron wave would slow economic growth this year, but the bank’s forecasts remained more optimistic than the RBA’s. Westpac has insisted for some time the central bank will be forced by rising inflation and falling unemployment to raise rates this year.

“If our forecasts prove correct the case for the first rate hike in the next tightening cycle by the August Board meeting in 2022 is strong,” Mr Evans said.  

Mining stocks outperformed after commodity prices jumped overnight in anticipation of Chinese stimulus efforts. The People’s Bank of China this morning cut its one-year loan prime rate by ten basis points to 3.7 per cent and its five-year rate by five basis points to 4.65 per cent. The cuts are intended to revive economic growth as the nation deals with a severe property slump.

The S&P 500 sank 0.97 per cent overnight as upbeat corporate earnings failed to soothe jitters over the interest rate outlook. The rate-sensitive Nasdaq Composite slumped 1.15 per cent into a technical correction.

Winners’ circle

Gold miners were the day’s standout performers in the wake of a huge rise in US rivals overnight. The NYSE Gold Bugs index of miners soared 7.88 per cent after gold jumped to a two-month high. The Australian gold-mining index jumped 7.3 per cent.  

Northern Star soared 11.2 per cent after reaffirming full-year production and costs guidance. The miner generated sales revenue of $950 million last quarter.

A 5 per cent increase in gold poured helped raise Resolute Mining 4.35 per cent. Total calendar-year production was 319,271 ounces, near the bottom of guidance of 315,000 – 340,000 ounces.

Elsewhere in the gold space, Evolution Mining put on 8.92 per cent, Silver Lake Resources 6.96 per cent and Perseus 6.08 per cent. Industry giant Newcrest gained 6.59 per cent.

Iron ore majors BHP and Rio Tinto touched multi-month highs after iron ore rose 2.3 per cent to US$130.20 a tonne and copper gained 2 per cent. BHP climbed 3.11 per cent, Rio 3.18 per cent and Fortescue Metals 4.65 per cent.

Explorer Chalice Mining firmed 7.46 per cent on news drilling had commenced at its Hartog Target within the Julimar Project in WA.

Nickel miner NiCo Resources continued its spectacular start to life as a publicly-listed company. Shares that listed yesterday at 20 cents hit 69.5 cents before paring their rise to 58.33 per cent at 57 cents.

A resource upgrade boosted Rox Resources 40.28 per cent. Appetite for battery material producers lifted Rarex 40 per cent.

Buoyant energy prices helped Woodside Petroleum and Santos declare record quarters. Woodside lifted sales revenue 86 per cent last quarter to $2.852 billion. The average realised price per barrel of oil equivalent jumped to $90, an increase of 53 per cent from the previous quarter. Sales volumes increased by 22 per cent.

The company is set to acquire BHP’s oil and gas portfolio in the second quarter of this year. The share price firmed 1.53 per cent.

Santos reported record annual production, sales revenue and free cashflow after completing a merger with Oil Search last month. Record production of 92.1 million barrels of oil equivalent included a 1.7 million barrel contribution from Oil Search assets since December 11. The share price gained 0.83 per cent.

Doghouse

A record quarter failed to lift Z1p Co far from yesterday’s 20-month low. Shares that traded as high as $10.40 last year hit $3.56 yesterday and $3.58 this morning. The BNPL firm reported record revenue and transaction volumes last quarter. The share price finished down 1.37 per cent at $3.61.

Incitec Pivot dipped 0.86 per cent after reaffirming guidance. The explosives and fertiliser group said strong commodity prices would help offset Covid-affected production and labour issues.

US payments giant Block commenced trade on the ASX at a discount to the US share price. The company formerly known as Square listed on the ASX today after acquiring Afterpay. Shares that closed at $177.58 in the US overnight closed at $176.63, down 0.35 per cent.

Other drags today included the major banks, supermarkets and Telstra.

Other markets

Hong Kong shares jumped after the Chinese rate cuts. The Hang Seng index climbed 2.33 per cent. China’s Shanghai Composite gained 0.29 per cent, Japan’s Nikkei 1.03 per cent and the Asia Dow 1.21 per cent.

Oil overcame early weakness to push back towards seven-year highs. Brent crude was lately off nine US cents or 0.1 per cent at US$88.35 a barrel after earlier falling more than $1.

Gold dipped US$3 or 0.16 per cent to US$1,840.20 an ounce.