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Miners and energy producers steered the share market to a third straight advance after Chinese progress against Covid outbreaks boosted commodity prices.

The S&P/ASX 200 rallied 19.5 points or 0.27 per cent. The Australian benchmark has put on more than 170 points since Friday amid speculation equities were temporarily oversold after four weeks of falls.

The energy sector climbed 2.1 per cent as Brent crude traded at a seven-week high. Banks, miners and utilities also strengthened. Tech and real estate stocks declined.

What moved the market

Commodity prices climbed overnight after Shanghai unveiled plans to reopen, the People’s Bank of China reduced mortgage rates for some buyers, and dire economic data fostered expectations for further stimulus measures.

Supermarkets, malls and restaurants reopened in Shanghai yesterday. Fewer than a million people remained under strict lockdown in the port city, a key link in global sea trade. Authorities today reported no new cases had been identified outside the strict lockdown zone for a third day.

Buyers targeted commodities that had sold off this month on fears of a Chinese economic slowdown. Iron ore climbed 3.9 per cent on the Dalian Commodity Exchange. Brent crude put on 2.4 per cent. Copper added 0.8 per cent.

The tug of war between equity bulls and bears continued overnight as US stocks swung wildly. The S&P 500 finished with a loss of 0.39 per cent. The Dow held onto a gain of 0.08 per cent. The Nasdaq slid 1.2 per cent.

The Dow is looking to break a run of seven straight weekly losses, its longest losing streak since 2001. US investment manager BlackRock today declared equity markets had fully priced in current headwinds.

“Equities have fallen hard this year on the prospect of rapid rate increases to rein in inflation, the tragic Ukraine war and a slowdown in China. We recently reduced risk, yet keep our modest stocks overweight. Why? The selloff means more of these risks are now priced,” the firm wrote in weekly market commentary.  

“We also believe the Fed’s sum total of rate hikes will be historically low and see recession fears as overblown.”

The minutes from this month’s Reserve Bank meeting showed the bank considered raising the cash rate target by 40 basis points before opting for an increase of 25 basis points to 0.35 per cent.

Inflation is expected to rise in the near term before falling back within the bank’s 2-3 per cent target range by mid-2024. The bank’s forecast is based on the cash rate reaching 1.75 per cent by year-end and 2.5 per cent next year.

CommSec told clients it expects the share market to rally from this level as interest rates normalise, but gains would be limited.

“CommSec expects modest gains for the sharemarket over coming months. The S&P/ASX 200 is expected to end 2022 in a range of 7,300-7,500 points,” chief economist Craig James wrote.

“When interest rates are ‘normalising’, that is in the process of return to levels consistent with a more ‘normal’ operating economy there are risks. Central bankers must be careful about how fast they lift rates and how high rates are lifted,” he added.

“The aim is not to markedly slow the pace of growth, but slow growth to a pace that is consistent with inflation holding in the 2-3 per cent target band.”

Consumer confidence fell for a fourth straight week as the cost of living continued to weigh. The ANZ-Roy Morgan index dropped 1.3 per cent to its lowest level since August 2020.

Winners’ circle

China-facing businesses were among the session’s best performers. Lynas Rare Earths gained 6.56 per cent, Whitehaven Coal 5.91 per cent and Mineral Resources 5.71 per cent. Allkem added 5.51 per cent, Champion Iron 3.7 per cent and Chalice Mining 3.68 per cent.

At the heavyweight end, Fortescue Metals rose 2.27 per cent, Rio Tinto 2.17 per cent and BHP 0.55 per cent. Energy giants Santos and Woodside both put on around 2 per cent. Beach Energy surged 6.12 per cent.

Pilbara Minerals firmed 5 per cent after winning a $20 million federal government grant to advance the chemicals facility at its Pilgangoora project. Nickel Mines edged up 3.02 per cent after signing a binding term sheet for solar power supply to its Hengjaya mine.

Perseus Mining tacked on 3.24 per cent on news shareholders in Canadian target Orca Gold voted in favour of the acquisition. The completion of the acquisition is still subject to court and TSX approval.

Double-digit full-year revenue growth helped lift forex specialist OFX Group 8.87 per cent to an all-time high. Underlying earnings jumped 53.1 per cent to $44.5 million. Turnover increased 32.7 per cent to $33.2 billion.

Havilah Resources jumped 79.41 per cent on news OZ Minerals has its eyes on the copper explorer’s Kalkaroo project in South Australia. The companies signed a conditional binding terms sheet giving OZL the option to acquire the project after a period of evaluation. OZL shares climbed 2.66 per cent.

Doghouse

Brambles fell 7.59 per cent from an eight-month high on news potential suitor CVC Capital had walked away. The European private-equity firm advised Brambles it would not put forward a formal proposal to acquire the Australian company or conduct detailed due diligence. CVC blamed “current market volatility” for its decision.

“The Board will continue to explore other options for the Company that maximise shareholder value,” Brambles said in a statement.

James Hardie dipped 3.47 per cent after reaffirming full-year guidance of US$740-US$820 million. The fiber cement manufacturer’s global sales increased by 20 per cent over the fourth quarter.  

Investors booked profits in some of the index’s best performers since Friday. Life360 declined 3.58 per cent, Codan 3.94 per cent and Goodman Group 4.09 per cent. Seek shed 4.33 per cent, REA Group 4.52 per cent and Block 3.33 per cent.

United Malt Group dipped 1.49 per cent after confirming half-year earnings slipped 5 per cent, in line with revised guidance. Improved prices were offset by the impact of drought in Canada, supply-chain issues and inflation.

Disruptions from wet weather and Covid labour issues prompted drilling services provider Mitchell Services to slash its earnings outlook. The share price slumped 17.39 per cent on news the firm now expected full-year earnings of $31-$35 million, down from previous guidance of $40-$44 million.

Other markets

Asian markets added to gains as the session advanced. The Asia Dow rose 1.22 per cent, Hong Kong’s Hang Seng 2.54 per cent, Japan’s Nikkei 0.42 per cent and China’s Shanghai Composite 0.59 per cent.

S&P 500 futures improved 20.5 points or 0.5 per cent.

Gold built on last night’s rebound, advancing US$13 or 0.7 per cent to US$1,827 an ounce.

Brent crude dipped seven US cents or less than 0.1 per cent to US$114.17 a barrel.

The dollar firmed 0.53 per cent to 70.08 US cents.

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