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The share market ended the day at an all-time closing high as its remarkable turnaround from Tuesday’s six-week low continued.
The S&P/ASX 200 surged 78 points or 1.06 per cent today to surpass its previous closing peak by two-tenths of a point. The rally extended the index’s rebound from Tuesday’s nadir to 181 points.
Strong leads from the US and gains in cyclical stocks helped investors look beyond the worst figures yet of the Greater Sydney Covid-19 outbreak.
A spectacular session for lithium miners saw gains of up to 10 per cent. Advances in banks and bulk metal producers outweighed declines in bond proxies.
What moved the market
A V-shaped week for the domestic market saw a second day of strong gains after US stocks closed within 1 per cent of all-time highs. While weakness at the start of the week was caused by fears the spread of the delta variant would stifle economic growth, investors have come around to the view any slowdown will prolong this era of easy monetary policy.
“The delta variant remains an ever-present downside risk for the markets in the near-term,” Craig Erlam of Oanda wrote. “But as long as inflation remains only a temporary problem, it also keeps central bank hawks at bay.”
A survey carried out by Natixis showed investment managers believe there is more upside to the bull market. A majority of experts believe the global economy is still six to nine months from completely reopening.
“We hear many concerns about peak growth, and we remind investors not to confuse peak growth and peak momentum. We expect the pace of the recovery to ease, but ease to levels that are still very supportive for corporate earnings,” said Jack Janasiewicz, portfolio manager and strategist for Natixis Investment Managers Solutions.
Among 42 experts polled for the survey, 88 per cent expect technology to outperform for the rest of the year, 83 per cent said healthcare and 74 per cent housing.
US stocks surged for a second night as upbeat corporate earnings and a recovery in bond yields helped soothe concerns about growth. The S&P 500 and Dow both gained a little more than 0.8 per cent.
The improving mood on global markets helped distract from less welcome developments at home. New South Wales reported 124 new local coronavirus cases, the highest single-day tally yet of the current outbreak. State Premier Gladys Berejiklian warned she expected case numbers to go even higher, due to the number of infectious people in the community.
Queensland announced it would close its border to all of NSW from tomorrow. Victoria reported 26 new local cases and South Australia two cases. Queensland and WA reported no new cases.
Payrolls declined 1 per cent in the two weeks to July 3 in an ominous sign before lockdowns spread to Victoria and South Australia. Sydney fell 1.9 per cent.
The day’s other economic data did not reflect the impact of recent lockdowns. Business conditions reached record levels last quarter before lockdowns began to bite. NAB’s quarterly survey showed conditions improved by 12 points to a record 32 points. Confidence eased fractionally from 19 points to 17, but remained well above long-term averages.
The trade surplus blew out to a record $13.3 billion, thanks to increased exports outweighing an increase in imports.
Winners’ circle
Lithium miners delivered the session’s biggest gains following a string of upbeat quarterlies. Orocobre surged 9.91 per cent on news production increased by 31 per cent over the same time last year and revenues increased 22 per cent to US$21.6 million.
Prospective merger partner Galaxy jumped 9.5 per cent. The company reported record quarterly production of lithium concentrate at its Mount Cattlin mine and a 17 per cent reduction in costs. Rival Pilbara Minerals soared 10.1 per cent to a record.
An 89 per cent improvement in mineral sands sales from the first half of last year boosted Iluka shares by 7.24 per cent. Rare earths miner Lynas jumped 9.01 per cent after winning a $14.8 million government grant to commercialise its in-house REE carbonate refining process.
Most of the bulk metal giants shrugged off a drop in iron ore after Chinese authorities ordered steelmakers to rein in production. BHP climbed 3.13 per cent. Rio Tinto added 1.22 per cent. Fortescue Metals dipped 0.4 per cent.
Northern Star advanced 5.39 per cent on news Evolution will buy its Kundana operation for $400 million. Proceeds from the sale will be invested in growth projects. The miner also reported quarterly gold sales within guidance. Evolution shares entered a trading halt while the company taps institutional shareholders to fund the acquisition.
The energy sector extended yesterday’s rebound from seven-week lows, rising more than 2.5 per cent following a 4.2 per cent jump in crude prices overnight. Buying interest was stoked by US data indicating strong demand for gasoline.
“Crude oil gained amid broader market gains, while signs of stronger demand boosted sentiment. Concerns of weaker economic growth saw Brent crude under pressure early in the session. But the release of inventory data in the US showed these concerns are unfounded,” Daniel Hynes, commodities strategist at Hynes Commodities, said.
A record quarter lifted Santos 2.59 per cent. Highlights included a 7 per cent increase in domestic gas sales and record sales revenue of US$1.1 billion. The company narrowed its full-year production outlook to the upper range of previous guidance.
Woodside Petroleum climbed 3.2 per cent, Oil Search 0.99 per cent and Beach Energy 4.96 per cent.
Adbri and Senex Energy rallied on news of a long-term gas supply contract. Under the seven-year deal, Senex will supply natural gas for Adbri’s South Australian manufacturing operations at market rates. Adbri shares gained 3.51 per cent. Senex shares added 3.49 per cent.
Newcrest inched up 0.42 per cent after beating the top end of guidance for full-year gold production at its flagship Cadia mine. Gains were contained by a warning gold and copper production will temporarily decline while a mill motor is replaced.
Doghouse
Bond proxies declined as a rebound in yields lured funds back to the bond market. Goodman Group fell 0.36 per cent, Bega Cheese 1.3 per cent, Sonic Healthcare 1.27 per cent and CSL 0.31 per cent.
Inflated expectations helped pull Z1P Co down 7.78 per cent despite the BNPL firm more than doubling revenues last quarter. Revenues increased by 104 per cent year-on-year to $129.9 million. Revenues also hit a new high last month.
Other markets
A strong session on Asian markets saw the Asia Dow rise 0.8 per cent, Hong Kong’s Hang Seng 1.75 per cent and China’s Shanghai Composite 0.26 per cent. Trade in Japan was suspended for a public holiday.
S&P 500 futures improved four points or 0.1 per cent.
Oil pared strong overnight gains. Brent crude slipped 17 US cents or 0.24 per cent to US$72.06 a barrel.
Gold dropped US$5.30 or 0.3 per cent to US$1,798.10 an ounce.
The dollar edged up 0.08 per cent to 73.57 US cents.
