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The ASX 200 extended its advance above 7000 as takeover action in the resources space helped offset pressure on bond proxies.
The Australian benchmark overcame early weakness to advance five points or 0.07 per cent to 7020.6. Today’s close was only the second above 7000 since June 9.
Copper miners rallied after BHP made an offer for Oz Minerals. Battery metal producers were lifted by progress of a US$430 billion climate bill through Congress. Real estate investment trusts and other equities that compete with bonds retreated as yields rallied.
What moved the market
An increasingly unflappable ASX continued the repairwork from the June global meltdown. The ASX 200 has bounced 9.6 per cent since last month’s low, rising for the last three weeks.
The market took in its stride mixed leads from Wall Street and a morning retreat in US equity futures. S&P 500 futures reversed a 0.3 per cent opening fall to a gain of a point or 0.02 per cent by the Australian close.
US stocks staggered on Friday before regaining most of their composure as unexpectedly strong jobs data implied interest rates will have to go much higher to slow growth and bring inflation under control. The S&P 500 fell 0.16 per cent.
“Average Hourly Earnings were revised up to 5.2% in the year to June and stayed there in July thanks to a 0.5% monthly rise, which followed a couple of months of 0.4% gains and thoughts earnings growth could soon be back below 5%. If anything, wages growth looks to be accelerating,” NAB’s head of FX Strategy, Ray Attrill, said.
How the rest of the week plays out is likely to be determined by corporate earnings from a string of big-hitters here and by Wednesday night’s US inflation report.
“The hope is that the reading will indicate that the US economy has reached its peak level in terms of inflation data. If the number confirms that it could support the market rally as it could provide some comfort to the Fed who is aggressively trying to control inflation. However, if the number shows that there is still some room left for the CPI to reach its peak level, that could trigger another interest rate hike of 75 basis points from the Fed,” Naeem Aslam, chief market analyst at AVATrade, said.
The domestic reporting season continued today with poorly-received updates from insurer Suncorp and rail haulage operator Aurizon (more below). This week brings reports from Commonwealth Bank on Wednesday, Telstra, AMP and QBE on Thursday and IAG on Friday.
Winners’ circle
Copper miners rallied after BHP launched an $8.3 billion takeover offer for Oz Minerals. Shares in the copper-nickel producer soared 35.25 per cent to $25.59 after BHP offered $25 per share. The OZL board rejected the offer on the basis it significantly undervalued the company and therefore was not in shareholders’ best interests.
BHP shares firmed 0.8 per cent. The miner has already built a stake in its target of less than 5 per cent. CEO Mike Henry said the offer represented compelling value.
“We are disappointed that the Board of OZL has indicated that it is not willing to entertain our compelling offer or provide us with access to due diligence in relation to our proposal,” he said.
Sandfire Resources jumped 6.36 per cent. Copper Mountain gained 38.55 per cent, Golden Deeps 18.18 per cent, 29Metals 15.18 per cent and Dreadnought Resources 13.33 per cent.
Battery metal producers caught a boost from the passage of US President Joe Biden’s US$430 billion climate bill through the Senate. Supporters say the Inflation Reduction Act includes almost US$370 billion of investment in clean energy.
Lithium miners ran again after providing most of last week’s best performers on the index. Lake Resources charged up 15.59 per cent. Core Lithium gained 5.84 per cent.
Rare earths producer Lynas tacked on 3.98 per cent. Nickel miner IGO firmed 2.67 per cent. American Rare Earths surged 20.63 per cent.
Other standouts included Imugene +9.62 per cent, Block +7.21 per cent and PointsBet +5.67 per cent.
A 4.4 per cent jump in Chinese iron ore prices this afternoon lifted Fortescue Metals 4.52 per cent. Rio Tinto gained 1.87 per cent.
Beach Energy rose 6.65 per cent after signing a deal to supply liquid natural gas to BP Singapore. Supply will commence in the second half of next year.
New contracts worth $100 million helped lift engineering group Monadelphous 2.02 per cent. Contract wins included providing infrastructure for an underground project in Mongolia and a range of services for three separate projects in WA.
Doghouse
Australian bonds sold off as traders adjusted their interest rate expectations in the wake of Friday’s blowout US jobs data. The yield on ten-year Australian government bonds climbed 12 basis points to the highest in more than a week.
Strengthening yields sap buying interest in equities that compete with bonds for institutional fund flows. REITs, consumer staples and healthcare providers declined.
The biggest heavyweight drags among bond proxies were Goodman Group -3.36 per cent, Wesfarmers -1.99 per cent, Telstra -0.99 per cent and Coles -0.84 per cent.
A 34.1 per cent slump in full-year group net profit pulled Suncorp down 4.64 per cent. The insurer said the result was affected by increased natural hazard costs and volatile investment markets. The group reaffirmed its FY23 targets.
Rail haulage operator Aurizon sank 3.67 per cent as a 2 per cent improvement in full-year revenues was outweighed by dips in earnings and profits and a cut to the final dividend. Flooding on the east coast, Covid interruptions and declines in customer needs impacted rail volumes. Underlying earnings declined 1 per cent. Underlying profit fell 2 per cent.
Other markets
A subdued session on Asian markets saw the Asia Dow edge up 0.28 per cent, China’s Shanghai Composite 0.07 per cent and Japan’s Nikkei 0.29 per cent. Hong Kong’s Hang Seng index shed 1.05 per cent.
Oil overcame early weakness. Brent crude was lately ahead 74 US cents or 0.8 per cent at US$95.66 a barrel after trading below US$94.
Gold eased 30 US cents or less than 0.1 per cent to US$1,790.90 an ounce.
The dollar bounced 0.46 per cent to 69.35 US cents.
