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Aussie shares recouped last week’s losses as takeover action and record US highs helped investors look beyond surging Covid cases in New South Wales.

The S&P/ASX 200 finished 60 points or 0.83 per cent ahead. Mining stocks spearheaded a strong rebound from last week’s 35-point loss.

Solid gains for banks, REITS and tech stocks helped the market weather news that NSW recorded 112 new local coronavirus cases in the 24 hours to 8pm last night.

The healthcare sector rallied after Wesfarmers lobbed a bid for the owner of the Priceline and Soul Pattinson pharmacy chains.

What moved the market

The ASX joined a regional rally following a strong finish to last week on Wall Street. The Asia Dow climbed 1.38 per cent. Japan’s key benchmark put on 2.13 per cent. China’s Shanghai Composite added 0.5 per cent and Hong Kong’s Hang Seng 0.41 per cent.

US stocks rebounded on Friday as a recovery in bond yields helped soothe concerns about global economic growth. The S&P 500 put on 1.13 per cent. The Dow added 1.3 per cent.

“We got new record highs for US stocks, higher US bond yields with curve re-steepening, a softer USD… and, with the exception of a slight fall in iron ore futures, stronger commodity prices across the board,” NAB Head of FX Strategy Ray Attrill said.

US futures wobbled on the eve of a new corporate quarterly reporting season. S&P 500 futures dipped seven points or 0.17 per cent. US companies are expected to report a huge rebound in profits from this time last year when the pandemic was at its height.

“The second quarter could be as good as it gets for economic growth,” Callie Bost, senior investment strategist at Ally Invest, told CNBC. “Earnings growth may slow, but analysts still expect S&P profits to grow by double digits in the next two quarters. It’s crucial not to lose faith in the market just because the economy’s strongest growth may be behind us.”

The local market had enough wind in its sails to absorb the latest bleak Covid-19 numbers with minimal difficulty. The ASX 200 finished more or less where it was when NSW health authorities announced the first triple-digit single-day tally of the current breakout.

Today’s increase appeared to snuff out any lingering hopes the current lockdown in Greater Sydney will lift on schedule this weekend. Commentator and physician Dr Norman Swan said modelling showed the lockdown could continue through August as cases rise exponentially.

Winners’ circle

The owner of the Priceline and Soul Pattinson pharmacy chains, Australian Pharmaceutical Industries (API), surged 19.65 per cent on interest from Wesfarmers. The retail and industrial conglomerate made a non-binding, indicative cash offer of $1.38 per share, valuing API at around $680 million.

The offer price represented a 21 per cent premium to Friday’s close. The bid has the support of major API shareholder, Washington H. Soul Pattinson.  

“If the Proposal is successful, API would form the basis of a new healthcare division of Wesfarmers and a base from which to invest and develop capabilities in the health and wellbeing sector,” Wesfarmers Managing Director Rob Scott said.

“The combination of Wesfarmers and API is a compelling opportunity to capitalise on API’s strengths and positioning in these markets while drawing upon Wesfarmers’ capabilities in retail and distribution.”

Wesfarmers inched up 0.5 per cent. Washington Soul Patts eased 1.52 per cent.

Elsewhere in the healthcare sector, Healius announced it had acquired unlisted Queensland imaging business Axis Diagnostics. Healius shares crept up 0.43 per cent. Telco Swoop rose 7.78 per cent after acquiring South Australian broadband provider Beam Internet for an enterprise value of $7.2 million.

The materials sector climbed 2.19 per cent to its strongest level in two months after Chinese moves to stimulate growth lifted commodity prices. The People’s Bank of China loosened lending requirements for financial institutions on Friday.

BHP jumped 3.17 per cent, Rio Tinto 1.75 per cent and Fortescue Metals 3.31 per cent. Further down the food-chain, Mineral Resources gained 4.21 per cent, Nickel Mines 3.79 per cent and OZ Minerals 2.87 per cent. Viva Energy tacked on 3.38 per cent following  a broker upgrade.

Mining contractor NRW Holdings rose 11.97 per cent to a five-week high after announcing the sale of mining assets to Boggabri Coal Operations. The sale will bring in around $81 million. Most of the payment will be used to pay down debt.

Bank stocks trimmed gains as bond yields pared an early advance. CBA cut its rise to 0.59 per cent, ANZ 0.43 per cent, NAB 0.54 per cent and Westpac 0.59 per cent. Macquarie Group held onto a gain of 0.91 per cent.

Goodman Group climbed 2.16 per cent to a post-GFC peak. The property giant last traded at this level in January 2008. Elsewhere in the property space, Charter Hall Group added 3.09 per cent, Waypoint REIT 2.68 per cent and Lendlease 2.32 per cent.

Strength in the greenback helped US-facing businesses. CSL climbed 1.3 per cent, Afterpay 0.96 per cent and Aristocrat Leisure 0.36 per cent.

Doghouse

An uptick in bond yields limited interest in growth stocks. Megaport dipped 1.53 per cent, Z1p Co 0.84 per cent and Nextdc 0.76 per cent.

Bond proxies mostly retreated as traders favoured sectors with better exposure to the global economic recovery. Brambles retreated 0.79 per cent, Coles 1.19 per cent, Telstra 0.53 per cent and Woolworths 0.16 per cent.

Other markets

Brent crude eased 25 cents or 0.33 per cent to US$75.30 a barrel. Gold slid US$8.90 or 0.49 per cent to US$1,801.70 an ounce.

The dollar declined 0.21 per cent to 74.73 US cents.

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