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The S&P/ASX 200 scored its first record close of the pandemic era as soaring demand for steel lifted miners and a bidding war for Crown Resorts boosted casino stocks.
The Australian benchmark inched seven points past the old record close of 7165.2 in the closing auction, finishing 92 points or 1.3 per cent ahead at 7172.8. The index also came within 25 points of last year’s all-time high of 7197.2.
Several miners hit records, including BHP, Rio Tinto and Mineral Resources. Crown Resorts and Star Entertainment soared more than 7 per cent on the prospect of a merger creating hundreds of millions of dollars of cost synergies.
What moved the market
A rampant market shrugged off a two-month high in the dollar and downbeat Covid news as investors focussed on tomorrow’s big-spending budget and the rivers of gold flowing from soaring commodity prices.
“It’s partly a strong lead from US equities on Friday, it’s partly a massive pop in commodity prices, especially copper and iron ore, and it’s partly due to anticipation that this week’s budget is going to deliver similar share price gains to the October 6 budget,” ThinkMarkets analyst Carl Capolingua said.
“Either way, it feels like there’s a great deal of good news out there at the moment. Add in the re-opening trade, and there aren’t many reasons why you wouldn’t want to own equities.”
Iron ore jumped as much as 10 per cent in Chinese and Singapore trade today as the buying frenzy intensified.
“This sector is very, very hot,” Vivek Dhar, commodities analyst at Commonwealth Bank, told Bloomberg Television. “Just when China’s steel demand impulse will ease is perhaps the biggest question of 2021… Supply is still not able to meet that strong demand.”
BHP climbed 3.11 per cent, surpassing its old March high. Rio Tinto put on 4.59 per cent and Fortescue Metals 7.92 per cent. Mining services company Mineral Resources rallied 3.75 per cent. Lithium miner Pilbara Minerals soared 10.59 per cent.
Gaming was the session’s other standout as the bidding war for Crown Resorts heated up. As Blackstone raised its offer by 50 cents per share, Star Entertainment added competitive tension to the contest with a merger proposal. Star shares jumped 7.67 per cent to a pandemic-era high after the gaming group said a merger would create cost synergies of between $150 and $200 million per annum. Crown shares climbed 7.26 per cent.
US stocks closed at record levels on Friday as traders interpreted disappointing April jobs figures as supporting the case for central bank support for longer. The S&P 500 climbed 0.74 per cent. The Dow added 0.66 per cent.
“A lacklustre rebound points to ongoing weakness in the recovery, justifying the need for stimulus,” NAB Director of Economics, Tapas Strickland, said. “The reaction in markets was risk-on, with equities lifting and the USD falling sharply,” he added.
Back home, business confidence and conditions recorded their strongest readings since 1997, as measured by NAB’s monthly survey. The confidence gauge rose to +26 from +17. Conditions improved to +32 from +24. A separate report showed retail sales increased by 1.3 per cent last month and were 2.2 per cent higher than a year ago.
Winners’ circle
The materials sector climbed for a fifth day, soaring 3.35 per cent to a new peak. While the big three did the heavy lifting, there were significant gains further down the food chain. Evolution Mining gained 6.04 per cent, Champion Iron 5.38 per cent, St Barbara 4.55 per cent and Oz Minerals 4.47 per cent. Gold giant Newcrest put on 2.82 per cent.
Woolworths rose 2.74 per cent after flagging plans to demerge its drinks and hospitality business. If the demerger is approved, eligible shareholders will receive one share in Endeavour Group for every Woolworths share. Woolworths would retain a 14.6 per cent interest in the demerged drinks business.
Three of the big four high-street banks advanced. NAB gained 1.16 per cent, Westpac 1.26 per cent and CBA 1.31 per cent. ANZ dropped 1.33 per cent as it traded without the right to a dividend.
Pendal announced it had bought US investment manager Thompson, Siegel & Walmsley for US$320 million. The Australian fund manager also reported a 64 per cent increase in half-year statutory net profit to $89.9 million. Shares were in a trading halt, pending a capital raising.
Gaming group PointsBet put on 0.22 per cent on news it will acquire US-based Premier Turf Club for US$2.9 million. Cleanaway rose 1.79 per cent after announcing Mark Schubert will replace Vik Bansal as CEO and Managing Director. Schubert joins the company from Origin Energy.
Doghouse
A profit downgrade sent A2 Milk down 13.11 per cent to a three-and-a-half-year low. A back-up of excess inventory and weak Chinese sales forced the NZ-based dairy company to revise its sales and profit expectations.
“It is clear that the challenges in the daigou/reseller and CBEC [cross border e-commerce] channels have been exacerbated by excess channel inventory and difficulties with visibility,” the company said.
Rival Bubs also touched a three-and-a-half-year low, declining 8 per cent.
Another shutdown at Incitec Pivot‘s Waggaman ammonia plant sent the company’s shares down 8.92 per cent. The company said the plant reopened for two weeks before a vibration probe failed, followed by a coupling in the refrigeration compressor, forcing successive shutdowns. The stoppages are expected to put a $26 – $33 million hole in this year’s net profit.
Travel and tourism stocks were mixed following weekend news Covid restrictions will remain in Greater Sydney for at least another week, and the federal government does not expect to reopen international borders until next year. Corporate Travel Management shed 2.3 per cent. Qantas lost 1.26 per cent. Sydney Airport rallied 1.01 per cent, Webjet 1.05 per cent and Flight Centre 0.77 per cent.
Other markets
US futures pared gains as Asian markets turned mixed. S&P 500 futures climbed eight points or 0.18 per cent. The Asia Dow put on 0.38 per cent and Japan’s Nikkei added 0.53 per cent. Hong Kong’s Hang Seng faded 0.29 per cent and China’s Shanghai Composite shed 0.05 per cent.
Oil started the week at a sprint after a ransomware attack shut down the US’s most important fuel pipeline over the weekend. Brent crude charged 47 cents or 0.69 per cent to US$68.75 a barrel.
Gold gained $7.50 or 0.4 per cent at US$1,838.80 an ounce.
The market shrugged off a jump in the dollar after the greenback was lowered by weak US jobs data. The Aussie hit its highest level since late February before easing 0.05 per cent to 78.54 US cents.
