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Powerful rebounds in beaten-down banking and technology stocks powered the share market to its second-largest gain of the year as interest rate worries temporarily subsided.

The S&P/ASX 200 surged 127 points or 1.94 per cent to its highest close in two weeks.

Today’s rise was the strongest in percentage terms since January 28. The rally extended the market’s recovery since last week’s low to 4.7 per cent.

All 11 sectors rose, led by financials, tech and energy. Gold mining was the only significant drag following a string of production downgrades.

What moved the market

Last week’s tentative ASX recovery gathered pace after a retreat in commodity prices and a slew of weak economic reports prompted US investors to reassess the outlook for rates. The S&P 500 soared 3.06 per cent on Friday, the biggest advance in two years. The Dow and Nasdaq also logged strong gains.

“Market conviction that perhaps the Fed won’t now hike rates as aggressively as previously feared and/or that rates cuts before the end of 2023 are now an even more realistic prospect if recession-like conditions lay ahead, have had a big hand in last week’s improvement in risk sentiment and which has now seen about two-thirds of the June 9-16 sell-off walked back,” NAB’s head of FX strategy, Ray Attrill, said.

CME’s closely-followed FedWatch took showed investors now expect official US rates to peak at 3.5 per cent in December, down from 3.75 per cent a week ago. The gauge also suggests the central bank could start cutting 12 months from now.

The retreat in rates expectations followed sharp declines in crude oil, iron ore and metals last week. Soaring prices for energy and raw materials helped lift global inflation to uncomfortable levels this year, forcing central banks to ramp up interest rates.

Oil prices had their worst week since early April, with ICE Brent falling more than 7% over the last week. Concern over the macro outlook has weighed heavily on the oil market, despite fundamentals remaining constructive,” ING’s head of commodities strategy, Warren Patterson, said.

“Prices of all major metals fell in London last week amid continued macro headwinds,” he added.

The key question for investors is whether the global recovery over the last few sessions marks a turning point in this year’s weakness in equities or just another bear market bounce.

“Traders are starting the week with a lot of optimism, but at the same time, caution is also the name of the game as many are skeptical about the current rally, and they are wondering if the rally will last or if it is nothing more than just a dead cat bounce,” Naeem Aslam, chief market strategist at AVATrade, said.

Winners’ circle

Roughly eight out of every ten stocks on the ASX 200 rose. The heavily-weighted financial sector provided much of the bulk behind the rally as buyers took advantage of last week’s 16-month low. Commonwealth Bank bounced 3.97 per cent. NAB put on 3.37 per cent, ANZ 3.01 per cent and Westpac 2.26 per cent.

In the tech space, Megaport advanced 9.11 per cent, Afterpay parent Block 5.48 per cent and NextDC 3.9 per cent.

Lithium miners filled many of the top slots in an extension of Friday’s sharp sector rebound. Core Lithium climbed 12.02 per cent. Lake Resources added 7.45 per cent. Liontown firmed 11.28 per cent.

At the pointy end of the mining spectrum, Fortescue Metals bounced 3.47 per cent, BHP 2.95 per cent and Rio Tinto 2.38 per cent.

Energy was another standout after Brent crude recouped losses through the first half of last week. Beach Energy advanced 4.1 per cent, Woodside 2.32 per cent and Santos 2.22 per cent.

Positive results from a trial of an experimental treatment for advanced gastric cancer lifted Imugene 45.45 per cent. Trial analysis showed the firm’s HER-Vaxx treatment reduced risk of death in chemotherapy patients.

An 18.6 per cent bounce in full-year underlying profit boosted Metcash 4.12 per cent. A shift in consumer behaviour contributed to “strong sales and earnings” for the operator of the IGA chain of convenience stores. Revenues increased 5.9 per cent and underlying earnings by 171.7 per cent.

“The Group’s significant lift in earnings and strong financial position led to a ~23% increase in total dividends for FY22, representing a 72% increase on a two-year basis.,” Group CEO Doug Jones said.

“Importantly, sales momentum has continued into FY23 with Group sales up ~9% in the first seven weeks of the year and growth in all pillars, partly buoyed by the impact of inflation.”

Insurer Suncorp gained 3.6 per cent after confirming media reports it was exploring a sale of its banking operations.

Link Administration climbed 4.07 per cent to $3.84 after suitor Dye & Durham slashed its acquisition offer price from $5.50 per share to $4.30. The Canadian legal software provider reduced its bid to reflect “the current state of the financial markets and values of both the Link Group and the PEXA shares”.

A 5.6 per cent independent revaluation of its property portfolio helped lift Charter Hall Social Infrastructure REIT 1.72 per cent. The trust will distribute 4.4 cents per unit for the quarter.

Carsales.com entered a trading halt to raise funds to acquire the 51 per cent of US marketplace platform Trader Interactive it does not already own.

Doghouse

Gold miners were the biggest drag after a costs and production warning from Evolution Mining continued a run of disappointing updates from ASX miners over the last week.

The firm said wet weather and Covid-induced labour shortages would affect production. Output for the next two financial years would be lower than previously advised. The share price dived 21.89 per cent.

Also weak were Northern Star -12.14 per cent, Newcrest -5.64 per cent and Ramelius Resources -5.91 per cent.

A copper production cut dragged OZ Minerals down 3.8 per cent. The miner reduced its copper guidance by 13 per cent and warned of higher costs due to lower volumes, labour shortages and inflation.

Project delays due to bad weather and labour and materials shortages knocked modular buildings manufacturer Fleetwood down 20.93 per cent. The company warned delays and cost increases would cap second-half earnings at the same level as the first half.

Zip Co dipped 3.74 per cent on news almost 175,000 shares will be released from escrow on July 3.

Other markets

A strong session on Asian markets saw the Asia Dow rise 2.06 per cent, China’s Shanghai Composite 0.84 per cent, Hong Kong’s Hang Seng 2.34 per cent and Japan’s Nikkei 1.47 per cent.

US futures reversed early weakness. S&P 500 futures were recently ahead four points or 0.11 per cent.

Oil added to Friday’s 2.8 per cent rally. Brent crude rose ten US cents or 0.1 per cent to US$109.20 a barrel.

Gold bounced US$7.70 or 0.4 per cent to US$1,838 an ounce.

The dollar dipped 0.18 per cent to 69.31 US cents.

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