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Aussie shares rose for a fourth day after a US recovery gathered pace and weaker-than-expected wages growth dampened fears of a bumper rate hike next month.

The S&P/ASX 200 climbed 70 points or 1 per cent to its highest close in a week and a half. The rally extended the benchmark’s recovery since Friday to 242 points or almost 3.5 per cent.

Resource stocks led for a second day. Commonwealth Bank, Woodside Petroleum and the supermarkets were among the drags.

What moved the market

Fears of a US recession receded overnight as solid retail sales and industrial production figures indicated the economy continued to grow last month. The S&P 500 rallied for a third night, adding 2.02 per cent.

“The equity market bounced back as traders and investors snapped up beaten-down shares after weeks of heavy selling in the US stocks,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Investors welcomed an encouraging report on retail sales, which painted a picture of a healthy US economy and eased worries around persistently high inflation crimping consumer spending.”

The ASX halved its initial rally by mid-morning before regaining momentum as wages data reduced pressure on the Reserve Bank to raise the cash rate by 40 basis points next month.

The Wage Price Index increased a seasonally-adjusted 0.7 per cent last quarter. Annual wages growth edged up to 2.4 per cent from 2.3 per cent in the previous quarter. Economists expected slightly stronger growth of 0.8 per cent for the quarter and 2.5 per cent for the annual measure.

The dollar eased almost 0.2 per cent before recovering to 70.33 US cents as currency markets adjusted to the diminished risk of a big June rate hike.

“The wage result should not stand in the way of a rate hike in June, but it does question the need for the RBA to risk unduly destabilising the economy with an aggressive 40 bps move,” BetaShares’ chief economist, David Bassanese, said.

The next major hurdle for rates-watchers comes with the monthly employment report tomorrow.

“All eyes are now glued to unemployment data for April 2022, due tomorrow, which would reveal how tight is the Australian labour market currently. It will be enticing to watch if the jobless rate dips below 4% for the first time since the 1970s in April or remain steady like in March,” Kalkine’s Sawhney said.

Winners’ circle

The return of Andrew Forrest to a more hands-on role helped boost Fortescue Metals by 2.01 per cent. An executive shake-up at the miner brought Forrest across from a non-executive role to Executive Chair. The CEOs of the iron ore miner and its green-energy business will both report to him.

Optimism about the improving outlook for Chinese demand as Shanghai reopens lifted the materials sector 2.5 per cent. South32 put on 5.15 per cent, Champion Iron 5.29 per cent and Paladin Energy 5.19 per cent. Heavyweights BHP and Rio Tinto gained 3.18 and 2.05 per cent, respectively.

An earnings upgrade lifted BlueScope Steel 1.51 per cent. Improved prices in the US allowed the steelmaker to raise its second-half earnings forecast to $1.375-$1.475 billion from previous guidance of $1.2-$1.3 billion.

Troubled fund manager Magellan jumped 3.09 per cent on news UK banking giant Barclays tipped another $75 million into a Magellan-backed investment venture, increasing its valuation. Barclays lifted its stake in Barrenjoey Capital to 18.2 per cent from an initial 9.9 per cent.

A double dose of positive news propelled Worley up 1.99 per cent to a pandemic-era high. The engineering group announced it had been awarded a three-year contract to service five of Shell’s offshore assets in the Gulf of Mexico. The company also announced progress in its strategic partnership towards a renewable plastics facility.

Monash IVF rose 5.69 per cent on news it will expand its footprint into WA with the acquisition of the Pivet Medical Centre. Pivet has branches in Perth and Cairns. Monash will pay $9.4 million up-front. Further earn-out payments may follow.

Diagnostics firm AnteoTech jumped 38.3 per cent after European regulators registered an updated version of its Rapid Antigen Test for Covid-19.

Doghouse

As in the US, the consumer staples sector was the biggest laggard as investors reduced defensive hedging. Coles fell 1.39 per cent. Woolworths dropped 1.09 per cent. IGA operator Metcash slid 2.55 per cent.

Eagers Automotive declined 3.28 per cent after warning delays in obtaining new vehicles will dent its half-year result. Shareholders at today’s AGM heard supply had not kept pace with an increase in orders. Consequently, underlying profit was expected to fall to $183-$189 million this half from $214.8 million in H121.

Extreme rainfall on the east coast and rising energy prices prompted an earnings downgrade at Boral. The building materials supplier sank 3.12 per cent after warning underlying earnings were expected to be $45 million weaker than guidance provided just a month ago.

“Ongoing rainfall in many parts of the east coast, particularly in New South Wales and Queensland, has continued to significantly impact our sales volumes, while also resulting in additional costs,” CEO & Managing Director, Zlatko Todorcevski, said.

“This has coincided with further sharp increases in energy prices, particularly in coal and electricity, impacting our production and logistics costs.”

Other markets

US futures drifted lower during a mixed afternoon on Asian markets. The Asia Dow gained 0.66 per cent. Japan’s Nikkei rose 0.77 per cent. China’s Shanghai Composite shed 0.05 per cent. Hong Kong’s Hang Seng  was unchanged.

S&P 500 futures slipped eight points or 0.2 per cent.

Oil recouped some of last night’s 2 per cent decline. Brent crude bounced 94 US cents or 0.8 per cent to US$112.87 a barrel.

Gold dropped US$10.40 or 0.6 per cent to US$1,808.50 an ounce.

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