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The stock market sealed its first weekly advance in a month as Chinese markets reopened for trade and the US Senate passed a stop-gap measure to avoid a default.
The S&P/ASX 200 rallied 63 points or 0.87 per cent to its highest close in more than a week.
All 11 sectors advanced, led by materials and technology. The rate-sensitive financial sector gained momentum as long-term interest rates rose to their highest since May. Macquarie Bank set a new record.
What moved the market
Today’s advance secured a gain of 135 points or almost 1.9 per cent for the week and ended a four-week losing run. The index bounced off a four-month closing low on Monday, then overcame a mid-week wobble with back-to-back gains yesterday and today.
Volatility continued to fade. The S&P/ASX 200 VIX or volatility index dropped today to its lowest this month. Also of note for investors wondering when to re-enter, the index stayed well clear of last week’s low, closing today back above 7300.
New South Wales is set to ease lockdown restrictions next week after passing the 70 per cent double-dose vaccination milestone.
“Optimism has returned to the equity market ahead of the planned easing of COVID-19 restrictions from Monday,” Kalkine Group CEO Kunal Sawhney said. “Australia’s largest city, Sydney, is set to mark an exit from a nearly four-month lockdown after reaching its 70 per cent full vaccination target.
“With signs of normalcy returning into the market, a rotational trade into cyclical stocks benefitting from the economic revival can be expected in the days ahead. Any sooner-than-expected rise in interest rates may further prompt a movement into cyclicals, weighing on high-growth shares.”
The mood on global markets improved since news broke yesterday of a deal to raise the US federal government debt limit. The Senate passed a stop-gap measure this morning, clearing the way for a vote in the House on Tuesday. The interim measure pushes back the threat of a damaging default until at least December 3.
“This is essentially a kicking can exercise, but hopefully it allows for a resolution to the infrastructure and social spending plan, before a new debt ceiling agreement takes place,” NAB currency strategist Rodrigo Catril said.
Overnight, the S&P 500 put on 0.83 per cent in anticipation of the vote passing in the Senate. US futures rose this morning before paring gains ahead of tonight’s September jobs report. S&P 500 futures trimmed a 0.2 per cent rise to two points or 0.05 per cent.
Chinese stocks also pared early gains as trade resumed after the Golden Week holiday. The Shanghai Composite cut an initial rise of more than 1 per cent to 0.33 per cent. Hong Kong’s Hang Seng turned negative, easing 0.26 per cent. Japan’s Nikkei added 1.86 per cent and the Asia Dow 0.84 per cent.
Winners’ circle
Mining stocks rallied as China reopened for business. Rio Tinto climbed 4 per cent, BHP 3 per cent and Fortescue Metals 2.44 per cent. A positive night for industrial metals helped Chalice Mining advance 7.36 per cent, Nickel Mines 3.87 per cent and OZ Minerals 2.74 per cent.
Macquarie Group hit an all-time high at $183.71 before trimming its rise to 0.9 per cent at $182.28. Magellan Financial Group bounced 5.57 per cent from an 18-month low.
The big four high-street banks finished mixed despite a four-month high in long-term interest rates. The yield on ten-year Australian government bonds climbed 6.5 basis points to 1.66 per cent, a level last seen in late May.
NAB advanced 1.39 per cent. CBA lifted 1.01 cent to its first gain since a broker downgrade on Wednesday. ANZ added 0.54 per cent. Westpac shed 0.19 per cent.
Woolworths rose 0.63 per cent to its highest in almost a month after provisionally settling a class action relating to underpayment of staff. The supermarket will pay 20,000 current and former staff $2,500 each plus retirement benefits. The $50 million payment will proceed on the basis that legal proceedings are discontinued.
Tech heavyweight Afterpay fuelled a 1.3 per cent rise in the sector with a gain of 1.96 per cent. Iress added 3.48 per cent and Appen 2.17 per cent.
Doghouse
EML Payments slumped 14.59 per cent after Ireland’s financial regulator proposed business limits that would “materially impact” the payment platform’s European operations. The Central Bank of Ireland advised EML’s Irish subsidiary that its “material growth policy” was higher than the regulator wants. The regulator previously raised concerns about EML’s risk and control frameworks and governance in relation to anti-money laundering and counter terrorism financing legislation.
IGA operator Metcash dipped 0.74 per cent on news Group CEO Jeff Adams will retire. Adams will be succeeded by Doug Jones, currently CEO and Senior Vice President of South Africa’s Massmart Wholesale.
Uranium miner Energy Resources finished flat after warning additional costs to rehabilitate its Ranger mine in the Northern Territory will be “material”. The miner previously warned of cost and schedule overruns.
Bond proxies were mixed in the wake of a sharp rise in yields. Transurban declined 1.57 per cent, Goodman Group 0.19 per cent and Coles 0.12 per cent. Wesfarmers put on 1.34 per cent, Telstra 0.52 per cent and CSL 0.83 per cent.
Other markets
Oil added to last night’s 0.5 per cent rebound. Brent crude lifted 97 US cents or 1.2 per cent to US$82.92 a barrel.
Gold eased US$2.20 or 0.13 per cent to US$1,757 an ounce.
The dollar faded 0.21 per cent to 73.01 US cents.
