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Earnings optimism helped lift the ASX to a five-week high ahead of updates this week from heavyweights on both sides of the Pacific.

The S&P/ASX 200 rallied 26 points or 0.34 per cent to its strongest close since mid-September. Today’s advance was the seventh in eight sessions.

Gains in Telstra, Woodside Petroleum and the major miners helped offset declines in Afterpay, Coles and some of the banks.

What moved the market

The October rebound continued into a fourth week ahead of earnings updates this week from Woolworths, Fortescue Metals, Newcrest and South32. The annual general meeting season is in full swing. Mining stocks have until the end of the week to submit quarterly reports.

In the US, the third week of the Q3 reporting season brings updates from the S&P 500’s five largest companies: Apple, Microsoft, Amazon, Alphabet and Facebook. Wall Street’s major indices will start at or near record levels. The Dow edged up 0.21 per cent on Friday to an all-time closing high. The S&P 500 retreated 0.11 per cent from Thursday’s record finish.

“Global equities continued their impressive rebound last week, with strength in the Q3 U.S. corporate earnings season offsetting concerns with regard to supply chain bottlenecks, inflation and interest rates. According to FactSet, an above-average 84% of the 23% of U.S. S&P 500 companies that have reported so far beat expectations,” BetaShares’ chief economist David Bassanese said.

Natixis portfolio manager James Beaumont expects cyclical stocks to outperform as economic growth regains momentum and rising bond yields constrain growth stocks.

“After September’s hiccup – when we finally got a 5% correction after a year without one, equity markets have since then resumed their positive trend supported by strong economic signals and positive earnings surprises. In that sense, we continue to see room for a rotation again into cyclical and value stocks, especially after the rebound seen in bond yields and improving Covid conditions,” Beaumont said.

The local market wobbled mid-morning before recovering as US futures reversed an initial decline. S&P 500 futures were lately ahead four points or almost 0.1 per cent.

In Asia, the Dow eased 0.12 per cent. Japan’s Nikkei shed 0.85 per cent. China’s Shanghai Composite gained 0.38 per cent and Hong Kong’s Hang Seng 0.1 per cent.

Winners’ circle

The top end of the market was nearly all green. Telstra climbed 2.14 per cent on news the federal government will bear most of the cost for its acquisition of the South Pacific’s leading telco, Digicel. The government will contribute US$1.33 billion and Telstra US$270 million. Telstra will own and operate the business, which has 2.5 million subscribers in PNG, Samoa, Tonga, Vanuatu, Nauru and Fiji.

A broker upgrade helped Macquarie Group crack $200 per share for the first time. Citi raised its recommendation to ‘Neutral’ from ‘Sell’. Shares in the investment bank rose as high as $202.50 before trimming their advance to 0.71 per cent at $200.47.

Gains in crude, gold and iron ore helped lift Woodside Petroleum 3.7 per cent, Newcrest 1.48 per cent, Rio Tinto 1.48 per cent, Fortescue Metals 1.4 per cent and BHP 0.74 per cent.

Other notable rises included Woolworths +1.24 per cent, Wesfarmers +0.58 per cent and Goodman +0.45 per cent.

The major banks were mixed: CBA up 0.55 per cent, ANZ up 0.39 per cent; NAB down 0.42 per cent, Westpac down 0.12 per cent.

Origin Energy hit an 11-month high after selling a 10 per cent stake in its liquefied natural gas joint venture in Queensland for $2.12 billion. EIG will take 10 per cent in Australia Pacific LNG, leaving Origin with 27.5 per cent, Sinopec with 25 per cent and ConocoPhillips 37.5 per cent. Origin shares climbed 3.86 per cent.

“Divesting a 10 per cent interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding,” Origin CEO Frank Calabria said.   

Mineral Resources bounced 8.96 per cent on plans to restart its Wodgina lithium mine. The mine was placed in care and maintenance in November 2019. Lithium prices have since rebounded significantly.

Viva Energy finished flat after reporting lockdowns knocked 25 per cent off fuel sales in NSW and Victoria during the September quarter, compared to the same period last year. Jet fuel sales fell 31 per cent.

Doghouse

Technology was the worst-performing sector following the Nasdaq’s under-performance in the US. The tech-heavy US benchmark skidded 0.82 per cent on Friday in the wake of underwhelming updates from Intel and Snap.

Here, Nearmap shed 3.57 per cent, Afterpay 2.7 per cent, EML Payments 3.15 per cent and Altium 1.38 per cent.

Perpetual gave back most of last week’s rise, falling 5.18 per cent. Other notable declines included Kogan -5.04 per cent and Aurizon -3.56 per cent.

Employee management services firm Smartgroup slumped 10.6 per cent after a consortium of potential buyers walked back a takeover offer. The bidders, comprising TPG Global and Potentia Capital, revised their “non-binding, indicative and conditional” offer from $10.35 to $9.25 per share after four weeks of due diligence. Smartgroup said it had decided to terminate negotiations.  

Other markets

Oil trimmed its longest run of weekly gains on record. Brent crude eased 17 US cents or 0.2 per cent to US$85.36 a barrel. On Friday, crude wrapped up a ninth straight weekly advance with a gain of 0.9 per cent.

Gold rose US$4.80 or 0.27 per cent to US$1,801.10 an ounce.

The dollar firmed 0.25 per cent to 74.87 US cents.

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