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The share market banked a third week of gains as a surge in commodity prices lifted miners while the tech sector played catch-up with the Nasdaq.

The S&P/ASX 200 rallied 63 points or 0.88 per cent to 7239. The advance lifted the benchmark 56 points or almost 0.8 per cent into positive territory for the week.

Strong gains in iron ore and copper powered the materials sector to a six-week high. Tech stocks also rose, in line with the overnight trend in the US.

What moved the market

A volatile week that included interest rate worries and a meltdown in green metal miners came good in the end as investors bet on a recovery in Chinese demand for Australian raw materials.

Iron ore and copper jumped overnight as Shanghai and Beijing continued to relax Covid restrictions. A retreat in the US dollar following soft US payrolls data boosted gold, crude and other commodities.

“Copper prices are up over 5%, the most in two years, fuelled by optimism that the easing of lockdown restrictions in China will unleash demand, although that doesn’t seem a satisfactory explanation for the one-day move as the reopening of Shanghai has been well telegraphed. Broad-based strength in commodity prices is also partly due to a much weaker USD with the DXY [US Dollar Index] -0.7%,” NAB’s Director, Economics, Tapas Strickland, said.

Rates worries crimped gains on both sides of the Pacific this week. Perversely, US stocks rallied overnight as soft payrolls data appeared to reduce pressure on the Federal Reserve to hike rates aggressively.

The S&P 500 jumped 1.84 per cent, extending its recovery from last month’s 52-week low to 9.6 per cent. The Nasdaq Composite put on 2.69 per cent.  

Last night’s private-payrolls miss sharpened hopes tonight’s US employment report will indicate rate rises are already have a cooling effect on the labour market, easing pressure on wages.

Interest rates will remain front and centre next week when the Reserve Bank holds its monthly policy meeting.

“All eyes are now glued to the RBA interest rate decision due next week, which is expected to provide further cues on market direction,” Kunal Sawhney, chief executive of research group Kalkine, said.

“While the RBA increased the cash rate much above the market expectations in May, it is expected to continue with its aggressive rate hikes in June. Speculations are rife that the upcoming rate hike will be of 40 basis points, given the economy expanded at a faster pace in the previous quarter than forecasted.

“Falling savings rate and higher household debt also seem to be boding well for a 40-basis points hike. Moreover, the RBA could take into account improving consumer spending, rising business investment and government spending while deciding the quantum of a rate hike.

“Most likely, the RBA will front-load rate hikes, so that it gets sufficient head room to tinker with the interest rate next year after observing its impact on inflation.” 

Winners’ circle

Expectations for a recovery in demand as China lifts Covid restrictions saw substantial moves in a range of Australian exports. Spot iron ore prices jumped 5.1 per cent in China. Copper rallied 4.8 per cent in US trade. Van Eck’s exchange-traded fund of rare earths/strategic metals rallied 5.1 per cent.

BHP advanced 2.52 per cent to its highest since mid-April. Fortescue Metals put on 4.12 per cent, Rio Tinto 2.67 per cent and Champion Iron 8.14 per cent.

Diversified miner OZ Minerals added 4.48 per cent. South32 gained 2.01 per cent.

The commodities rally brought relief at the end of a challenging week for investors in green metals. Pilbara Minerals bounced 7.46 per cent, Liontown Resources 6.72 per cent and Nickel Industries 6.58 per cent.  

A four-week high in gold boosted the local sector. De Grey rose 4.81 per cent, Gold Road Resources 7.09 per cent and Sandfire 4.38 per cent. Newcrest put on 1.4 per cent.

The volatile tech sector tracked the latest upswing on the Nasdaq. WiseTech advanced 5.06 per cent, Afterpay parent Block 4.52 per cent and Altium 3.92 per cent.

Doghouse

Diagnostic imaging provider Healius dropped 8.65 per cent after warning of a “difficult” second half. The company said it was trading broadly in line with revised guidance but was experiencing high levels of Covid infections among staff and patients.

“Healius announces that its unaudited underlying EBIT for the year-to-date to May 2022 is in the order of $473 million, with strong trading in the first half but more difficult market conditions in the second half of the financial year,” the company said.

Traditional defensive assets faced selling pressure as investors rotated into sectors with better upside potential.

Protective wear manufacturer Ansell fell 3.57 per cent following a downgrade from Credit Suisse. Domino’s Pizza cooled 3.69 per cent. Centuria REIT shed 1.17 per cent.

Insurers Suncorp and IAG fell 1.51 and 0.7 per cent, respectively.

A retreat in bond yields kept the banks in check. NAB dipped 0.06 per cent. CBA shed 0.23 per cent.

Other markets

In Asia, the regional Dow gained 0.47 per cent. Japan’s Nikkei rallied 1.2 per cent. Markets in China and Hong Kong closed for a holiday.

US futures inched higher. S&P 500 futures added three points or almost 0.1 per cent.

Gold was steady near last night’s four-week high. The yellow metal firmed 50 US cents or 0.03 per cent to US$1,871.90 an ounce.

Oil kept most of last night’s 1.1 per cent advance.  Brent crude eased 34 US cents or 0.3 per cent to US$117.27 a barrel.

The Australian dollar climbed more than 1 per cent to its highest in six weeks. The Aussie was lately buying 72.59 US cents.   

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