Aussie stocks closed at fresh highs, fuelled by a rebound in commodity stocks as iron ore and crude steadied.
The S&P/ASX 200 climbed 29 points or 0.38 per cent, closing above 7500 for the first time. The index finished at 7503, passing Monday's record finish by ten points.
BHP and Rio Tinto pushed back towards record levels. Wesfarmers made a new high. The rally was kept in check by US-facing businesses following a retreat in the greenback.
What moved the market
Investors appeared increasingly comfortable with the Reserve Bank's view the economy will bounce back quickly when enough Australians are vaccinated for lockdowns to become a thing of the past. The RBA yesterday wrong-footed many economists and forex traders by announcing it will start to wind down its bond-buying program next month despite evidence the economy will contract this quarter. The share market briefly sank 36 points before halving its fall by yesterday's close.
"The Reserve Bank of Australia’s decision to stick with its planned tapering of bond purchases left market participants in a surprise. The RBA’s hawkish signal was quite unexpected at a time when the reimposition of lockdown restrictions continues to dent the economy," Kalkine Group CEO Kunal Sawhney said.
"The central bank seems to be confident over a rapid recovery in economic growth from a recent COVID-induced contraction once the lockdowns are lifted. However, the immediate economic outlook appears doubtful as uncertainty looms over how long the current lockdown measures will remain in force."
Iron ore and crude oil have been under pressure in recent sessions following a Chinese environmental crackdown on steelmakers and concerns about the demand implications of the spread of the delta variant. Iron ore rebounded yesterday. Oil steadied today following two straight declines. Brent crude was last down two cents or 0.03 per cent at US$72.39 a barrel.
"Iron ore prices were seen to be regaining momentum after falling to their lowest level in two and a half months. The uncertainty about steel production cuts in China over the rest of 2021 provided some support to the iron ore prices on Tuesday," Kalkine's Mr Sawhney said.
"However, the commodity broadly appears to be under pressure since China has ramped up its commitment to minimise emissions by reducing steel output in the wake of a slowdown in global manufacturing."
The day's economic data underscored the impact of lockdowns. The Australian Performance of Construction Index fell to 48.7 last month from 55.5 in June. (Readings below 50 indicate contracting activity.)
Services sector activity also slumped. The final IHS Markit Services PMI dropped to 44.2 from 56.8 in June. Retail sales declined 1.8 per cent in the same month.
A record close in the US overnight gave Australian investors the confidence to keep buying. The S&P 500 rallied 0.82 per cent. The Dow put on 0.8 per cent and the Nasdaq 0.55 per cent.
US futures wavered this afternoon, but not by enough to trigger alarms. S&P 500 futures dipped two points or 0.05 per cent.
The nation's mining giants recouped most of yesterday's losses after iron ore edged higher for a second day. Ore prices dropped through the US$200 level late last week but have shown signs of steadying above US$180 a tonne. BHP put on 2.08 per cent, Rio Tinto 1.52 per cent and Fortescue Metals 0.38 per cent.
Woodside rallied 1.01 per cent during a positive session for energy stocks after announcing its "transformational" Scarborough gas project will cost 5 per cent more than previously estimated. The updated cost estimate of US$12 billion includes modifications for processing gas onshore and an increase to offshore production capacity.
An underlying half-year net profit of $76.4 million and the resumption of dividend payments helped lift Genworth 7.55 per cent. The mortgage insurer declared a statutory profit of $59.4 million and will pay an interim dividend of five cents per share.
“The result reflects the improved economy, housing market appreciation and low interest rates experienced during the half," CEO and Managing Director Pauline Blight-Johnson said.
REA Group ticked up 0.82 per cent after completing the sale of its Malaysian and Thai business to PropertyGuru in exchange for an 18 per cent equity interest in PropertyGuru.
CBA was the best of the big four banks, rising 0.77 per cent. Westpac inched up 0.16 per cent. ANZ added 0.21 per cent. NAB lost 0.08 per cent.
Other notable gains at the top end included Newcrest +0.76 per cent, Woolworths +0.74 per cent and Goodman +1.06 per cent. Wesfarmers rose 0.55 per cent to a record.
The dollar's sudden leap yesterday back above 74 US cents on the RBA's quantitative easing announcement depressed companies that generate much of their income in US dollars. Aristocrat Leisure fell 0.99 per cent, Afterpay 0.92 per cent, CSL 0.69 per cent, Brambles 0.43 per cent, Macquarie Group 0.29 per cent and Transurban 0.14 per cent.
The landlord for Bunnings Warehouses eased 2.2 per cent despite lifting full-year profits 24.9 per cent as the value of its investment properties increased by $149.2 million. BWP Trust will pay a final distribution of 9.27 cents per share.
The suspension of the trans-Tasman travel bubble prompted a profit warning from Air New Zealand. The airline said it now expected to lose up to $530 million this financial year. The company said as recently as mid-June that it hoped to contain its loss to less than $450 million. The share price dipped 0.71 per cent.
Car parts and swimming pool business GUD sagged 3.31 per cent after declining to provide full-year guidance, citing trading uncertainty caused by Covid lockdowns. The company reported a 27.2 per cent increase in full-year revenues and a 39.6 per cent jump in net profit to $61 million.
Asian markets were mixed but mostly higher. The Asia Dow put on 0.48 per cent, China's Shanghai Composite 0.68 per cent and Hong Kong's Hang Seng 0.99 per cent. Japan's Nikkei trimmed its loss to 0.23 per cent.
Gold firmed US$2.90 or 0.16 per cent to US$1,817 an ounce.
The dollar was steady at 73.97 US cents.