Join our daily newsletter At The Bell to receive exclusive market insights
The share market logged its highest close in a week and a half after a UK government backdown on a controversial tax plan helped trigger a massive relief rally on Wall Street.
The S&P/ASX 200 jumped 115 points or 1.72 per cent to 6779.
The gains followed an overnight surge in US stocks, and as strengthening US futures suggested more to come tonight. S&P 500 futures rallied more than 1.5 per cent this afternoon, inspiring the ASX 200 to close near a session high.
Growth stocks, REITs and other highly-geared sectors led as the cost of long-term borrowing retreated. Bank stocks rose after trading updates from US peers highlighted a sharp profit lift from interest rate rises.
What moved the market
The ASX joined a global relief rally after the UK government scrapped a controversial unfunded “mini budget” that was set to boost the economy at the same time as the Bank of England was hiking rates to slow inflation. The mismatched objectives fuelled confusion on financial markets and ultimately led to the sacking of the UK’s finance minister.
Markets welcomed a decision overnight by the new Chancellor of the Exchequer, Jeremy Hunt, to scrap most of the plan. The pound jumped 2 per cent against the greenback. Bond yields around the world backed off recent highs, easing pressure on companies that depend most on borrowing to fund operations.
The S&P 500 rallied 2.65 per cent. The Nasdaq Composite jumped 3.43 per cent, its biggest advance since July.
Gains this afternoon on futures markets suggested the rally will continue tonight. S&P 500 futures soared 65 points or 1.75 per cent as rates continued to retreat. European futures also pointed sharply higher following reports the Bank of England will pause quantitative tightening until bond markets settle.
Ten-year yields in Australia and the US dropped back below 4 per cent. The Australian ten-year yield was lately down 12 basis points at 3.915 per cent.
Rates retreated even after the Reserve Bank warned its official benchmark rate was likely to rise in the months ahead. The minutes of this month’s policy meeting showed the board remained committed to bringing inflation back within the bank’s 2-3 per cent target range.
“This was likely to require further increases in interest rates over the period ahead,” the minutes noted.
The bank’s Deputy Governor Michele Bullock told a conference this morning, “The Board expects to increase interest rates further over coming months. But the pace and timing will be determined by the economic data.”
Today’s rebound continued a run of sharp moves in both directions. The ASX 200 jumped 116 points on Friday, then gave back 94 points yesterday.
Winners’ circle
The financial sector climbed 2 per cent to a two-month high after a trading update from Bank of America underscored the tailwinds for lenders from recent rate hikes. The US bank reported its net interest income jumped 24 per cent last quarter.
NAB rallied 1.46 per cent, ANZ 0.94 per cent and Commonwealth Bank 1.72 per cent. Macquarie Group jumped 5.26 per cent.
Westpac rallied 2.35 per cent to its highest since early June after confirming media reports it was looking to acquire payments platform Tyro. The bank said it was “in preliminary discussions” with Tyro, but there was “no certainty that any transaction will result”. Tyro gained 2.4 per cent.
Growth stocks soared as the cost of borrowing retreated in the wake of the UK government’s tax backdown. The yield on ten-year Australian government bonds fell back below 4 per cent, mirroring similar declines on global bond markets.
Novonix jumped 18.99 per cent, Afterpay parent Block 10.69 per cent and Telix Pharmaceuticals 11.09 per cent.
HUB24 soared 14.18 per cent on news the platform attracted net inflows of $3 billion last quarter, increasing total funds under administration to $86.4 billion.
In the property space, Lendlease gained 5.88 per cent, HomeCo 5.47 per cent and Charter Hall Group 4.28 per cent.
Lithium miners rallied after the price of the battery metal hit a new high in China. The strength of demand was underlined by the latest auction at Pilbara Minerals. Spodumene concentrate that sold for $1,250/dmt in July last year attracted a pre-auction offer of $7,100 this month.
Lake Resources put on 8.46 per cent, Core Lithium 4.94 per cent and Liontown 4.08 per cent. Pilbara Minerals finished 0.21 per cent ahead after giving up most of its early gains.
Rio Tinto inched up 0.14 per cent following a cautious trading update. The miner warned it now expects full-year iron ore shipments at the lower end of guidance.
Ore costs guidance was unchanged, but copper unit cost estimates were upwardly revised to 150-170 US cents per pound from previous guidance of 130-150 US cents. The miner also announced it would kick-start the Rhodes Ridge ore joint venture in the east Pilbara.
Brambles inched up 0.26 per cent after reaffirming full-year guidance. Sales revenue improved 6 per cent in the first quarter to US$1,346 million.
Treasury Wine Estates advanced 2.05 per cent after today’s AGM heard trading conditions and earnings were in line with expectations last quarter. Inflation and costs were also in line with guidance. The winemaker said it was on track to deliver strong growth and earnings margin expansion.
Doghouse
Gold miner St Barbara tumbled 21.64 per cent to a six-year low after downgrading guidance to reflect a production miss and a blowout in costs. The company cut the full-year target at its flagship Gwalia mine by 14 per cent from 1.1 million tonnes of ore to 950,000 tonnes. The miner will defer capital spending on several projects.
Energy was the only sector to retreat, ignoring a modest rebound in crude overnight. Santos fell 1.19 per cent, Woodside 0.75 per cent and Beach Energy 0.32 per cent.
Iron ore junior Hawsons Iron added to yesterday’s 62.16 per cent collapse following a decision to delay a banking feasibility study on its flagship project. The share price dropped another 30.71 per cent today.
Other markets
A green afternoon on Asian markets saw the Asia Dow rise 1.65 per cent, China’s Shanghai Composite 0.16 per cent, Hong Kong’s Hang Seng 1.03 per cent and Japan’s Nikkei 1.49 per cent.
Oil added to last night’s 1.4 per cent bounce. Brent crude firmed 64 US cents or 0.7 per cent to US$92.26 a barrel.
Gold overcame early weakness. The yellow metal inched up 10 US cents or 0.01 per cent to US$1,664.10 an ounce.
The dollar regained 63 US cents, lately ahead 0.34 per cent at 63.18 US cents.
