The share market signed off with a record close ahead of a long weekend as positive US leads and falling bond yields offset any lingering inflation worries.
The S&P/ASX 200 rallied ten points or 0.13 per cent to secure a fourth straight weekly advance.
What moved the market
Today's rise extended the index's skinny tally for the week to 17 points or 0.2 per cent. Soft US leads restrained the local market for much of the week until last night's relief rally.
The S&P 500 rose 0.47 per cent overnight as bond markets signalled they were unperturbed by a 5 per cent jump in consumer prices. US treasury yields swooned to their lowest since early March.
"Equity investors seem to have put their inflation worries to rest for some time that a higher-than-expected rise in inflation could push policymakers to reconsider their stimulus measures," Kalkine Group CEO Kunal Sawhney said.
"Investors were seen to be in a largely buoyant mood, with the US economy observing a remarkable recovery from last year's virus-induced economic slump. Optimism about the economic recovery surfaced after the latest data exhibited a decline in claims for jobless benefits to their lowest level last week since the start of the COVID-19 outbreak."
Here, traders snapped up stocks best positioned to benefit from cheap lending rates. Tech stocks, utilities and healthcare advanced. Mining and energy stocks improved as the day wore on. Lenders declined.
The market took its time to find its feet. A bout of profit-taking sent the index down 28 points in early action as traders pared positions ahead of the long weekend. The market rebounded as the mining heavyweights added to gains and most of the banks pared losses.
Volatility has collapsed on equity markets in recent weeks as global shares trade at record levels. The VIX, Wall Street's volatility index, hit a 15-month low this week. The Australian measure declined more than 10 per cent this session. Kalkine's Mr Sawhney said volatility extremes often presaged market eruptions, but in the meantime pushed traders to the sidelines.
"As volatility is often associated with fear, such reduced volatility can prompt investors to take bold market moves, triggering highly volatile periods in the weeks ahead. At the same time, the reduced volatility is likely to keep traders at bay, who attempt to make huge stock market gains every single day from increased volatility," he said.
Buying interest today may have been sharpened by news Victoria recorded zero locally-acquired new Covid cases yesterday for the first time since the start of the latest breakout.
Growth stocks and bond proxies were the obvious winners from last night's dive in global bond yields. Tech stocks become more attractive when yields decline because of the impact of borrowing costs on valuations. Bond proxies compete with bond markets for investment funds and prosper when returns on bonds weaken. The yield on ten-year Australian bonds sank this morning to the lowest since February before rebounding.
Appen led the tech charge, rising 5.56 per cent. Afterpay gained 3.68 per cent, Nanosonics 3.28 per cent and Nextdc 1.98 per cent.
The heavyweight miners took a while to warm up, but eventually added bulk to the morning reversal. Fortescue Metals firmed 1.71 per cent, Newcrest 3.06 per cent, BHP 1.35 per cent and Rio Tinto 0.02 per cent.
Wesfarmers put on 0.71 per cent, CSL 0.48 per cent, Brambles 0.45 per cent and Telstra 0.28 per cent.
A strong trading update lifted retail group Premier Investments to an all-time high. Sales for the first 18 weeks of the year increased 70 per cent above the same Covid-affected period last year and 15.8 per cent over the equivalent Covid-free period in 2019. Shares in the Solomon Lew-controlled retailer rose as high as $28.75 before easing to $27.44, a gain of 0.4 per cent.
Domino's Pizza climbed 1.1 per cent back towards record levels after striking a deal to acquire Domino's Taiwan for around $79 million. The Taiwanese operation is the island's second-largest pizza chain, with 157 outlets.
The financial sector declined as Australian bond yields followed US yields lower. Declining yields are a net negative for lenders because tightening borrowing costs crimp margin opportunities. ANZ dropped 1.53 per cent, Westpac 1.13 per cent, NAB 0.6 per cent and CBA 0.48 per cent. The sector hit a three-and-a-half-year high last week.
Property stocks have an inverse relationship with yields, but were vulnerable to profit-taking after the sector closed at a pandemic-era peak last night following four weeks of gains. Dexus gave up 2.01 per cent, Stockland 1.44 per cent and Goodman Group 0.43 per cent.
Crown Resorts slumped 1.45 per cent on news the Victorian Royal Commission into the betting group's suitability to hold a casino licence had been extended by ten weeks. The extension ensures the company's dirty laundry will be aired until October 15.
Supermarkets Woolworths and Coles both dropped 0.12 per cent. Transurban eased 0.9 per cent. Aristocrat Leisure fell 0.54 per cent.
Cimic declined 1.44 per cent as it traded without the right to a dividend.
Asian markets mostly improved as the afternoon advanced. The Asia Dow gained 0.28 per cent, Hong Kong's Hang Seng 0.48 per cent and Japan's Nikkei 0.05 per cent. China's Shanghai Composite declined 0.33 per cent.
US futures marked time. S&P 500 futures edged up three points or 0.07 per cent.
Oil unwound some of last night's gains. Brent crude declined 15 cents or 0.21 per cent to US$72.37 a barrel.
Gold built on a tentative rally since last night's US data, rising $6.40 or 0.34 per cent to US$1,902.80 an ounce.
The dollar rose 0.1 per cent to 77.54 US cents.