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Australian shares climbed for a third session as energy stocks surged and the Reserve Bank dismissed worries that official rates will rise before 2024.

The S&P/ASX 200 finished 12 points or 0.16 per cent ahead after overcoming an early dive and a mid-session wobble.

The energy sector surged almost 4.5 per cent as gas and oil prices rallied. The heavyweight miners finished mixed. Supply-chain logistics specialist Brambles skidded more than 8 per cent on a downbeat profit outlook.  

What moved the market

A choppy session ended near its high as US futures firmed ahead of tonight’s consumer inflation report. S&P 500 futures rose eight points or 0.2 per cent.

The local market sold off, then rallied afresh after Reserve Bank Governor Philip Lowe warned the market had mispriced the outlook for official rates. The bank has repeatedly said it does not see the cash rate increasing until at least 2024. Despite that, Mr Lowe said the implied cash rate derived from overnight index swaps suggests an increase to 0.25 per cent by the end of next year and 0.6 per cent by the end of 2023.

“I find it difficult to understand why rate rises are being priced in next year or early 2023,” Mr Lowe said in an online address to the Anika Foundation. “While policy rates might be increased in other countries over this timeframe, our wage and inflation experience is quite different.”

Mr Lowe said the bank expects the economy to contract by at least 2 per cent this quarter, but grow next quarter as states reopen. Overseas events suggested spending will rebound so long as enough Australians are vaccinated.

“This experience suggests that having COVID-19 circulating in the community does not prevent a quick bounce back in spending, provided the population is highly vaccinated,” he said

“Most people are keen to do the things they used to and they will spend if they have the opportunity and the income. My expectation is that the same will be true here, although we still can’t be sure exactly what living with COVID-19 will look like in Australia.”

The dollar retreated 0.35 per cent to 73.39 US cents as forex markets adjusted to the rates outlook.

Consumer sentiment rebounded strongly in Sydney last week after the NSW state government outlined the road out of lockdown. A 10.6 per cent surge in optimism in the city helped lift the national sentiment index 3.1 per cent to 103.1, according to ANZ and Roy Morgan.  

Business confidence improved a fraction last month, but pessimists outnumbered optimists. NAB’s confidence measure rose to -5 from -7 in July. Conditions also picked up to +14 from +10 the previous month.

“While lockdowns in NSW and Victoria and shorter disruptions across other states continue to impact businesses, trading and profitability conditions improved slightly in August. Overall conditions improved 4pts, indicating some resilience in the economy under difficult circumstances,” said NAB chief economist Alan Oster.

Winners’ circle

The energy sector jumped 4.45 per cent to its highest in almost a month as natural gas and crude prices responded to news US production remained constrained by damage from Hurricane Ida. The US Bureau of Safety and Environmental Enforcement said 43.6 per cent of Gulf oil output and 51.6 per cent of natural gas output were off-line.

“There had been an expectation that a lot of the damage to the infrastructure caused by the storm wouldn’t take too long to fix,” Michael Hewson, chief market analyst at CMC Markets UK, said. “This turns out to be a little wide of the mark, and could well go on for a few weeks more.”

Beach Energy jumped 7.21 per cent, Woodside Petroleum 6.23 per cent, Oil Search 5.35 per cent and Santos 5.19 per cent. AGL Energy bounced 4.12 per cent off a near-decade low.

Gold stocks rose for a third session after the yellow metal inched back towards US$1,800 an ounce. Gold Road Resources firmed 5.75 per cent, Westgold 2.34 per cent, Chalice Mining 6.55 per cent and Newcrest 0.08 per cent.

Telstra rallied 1.28 per cent to a three-week high. Biopharma Clinuvel climbed 1.56 per cent to a near two-year peak.

Rio Tinto and BHP shrugged off further weakness in iron ore, both rising 0.6 per cent. Fortescue declined 1.79 per cent.

Westpac rose 0.31 per cent after the PNG regulator knocked back the bank’s proposal to sell its stake in Westpac Bank PNG to Kina Bank for $420 million. Kina Securities fell 5.56 per cent. Westpac was looking to divest the business as part of a strategy to simplify operations.  

Most of the banks have been stuck in a sideways trading band for the last month. CBA gained 0.28 per cent, NAB 0.18 per cent and ANZ 0.33 per cent. Macquarie Group rallied 1.86 per cent back towards last week’s all-time high.  

Doghouse

Supply-chain logistics specialist Brambles dived 8.32 per cent following a poorly-received investor update. Shareholders were spooked by sluggish forecast underlying profit growth of 1-2 per cent this year before a revival in FY23. This year’s figures were significantly lower than market estimates.

The company said it would spend US$50 million this year on “short-term transformation costs”. Revenues were expected to increase 5-6 per cent.

Uniti Group briefly tanked more than 15 per cent after a director was charged with two counts of insider trading in relation to a previous role. ASIC alleged Vaughan Bowen had inside knowledge when he sold 5.6 million shares in Vocus Group a day before EQT Infrastructure withdrew a takeover offer.

Each charge carries a maximum penalty of 15 years’ imprisonment. Uniti shares were 5.11 per cent in the red at $3.90 when they were placed in a trading halt. Earlier the share price plunged as low as $3.42.

A rebound in bond yields sapped interest in growth stocks and alternatives to bonds. Afterpay fell 1.36 per cent, Woolworths 0.19 per cent, Goodman 0.27 per cent and CSL 0.66 per cent.

A government contract extension worth more than $100 million in revenue briefly lifted Cimic. Subsidiary company UGL won an extension from Transport for NSW to build and maintain an extra 56 passenger rail cars and install a transformer on the Central Coast. Shares faded to a loss of 0.42 per cent.

Among companies trading ex-dividend, Breville shed 2.07 per cent, Inghams 1.2 per cent, TPG Telecom 0.46 per cent and News Corp 0.85 per cent.

Other markets

Asian markets were mixed. The Asia Dow inched up 0.06 per cent. Japan’s Nikkei added 0.57 per cent. China’s Shanghai Composite dropped 0.56 per cent and Hong Kong’s Hang Seng 0.3 per cent.

Oil added to overnight gains. Brent crude firmed 53 US cents or 0.7 per cent to US$74.03 a barrel.

Gold was steady at US$1,794.40 an ounce.

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