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Australian shares rebounded strongly this session but could not avert a fourth straight weekly decline as financial markets continued to factor in the risk of a global slowdown as rates rise and China pursues zero-Covid.

An end-of-week relief rally lifted the S&P/ASX 200 134 points or 1.93 per cent from its lowest level in 15 weeks.

Battered tech and real estate companies led the recovery. Gold miners were the only laggards as 11 sectors advanced.

What moved the market

Buyers finally stepped up after weeks of down-pressure on the ASX. The benchmark neared a technical correction yesterday after falling almost 9 per cent since its April peak.

Today’s rally was the second-best of a challenging year dominated by worries about the economic implications of surging inflation, higher rates, a war in Ukraine and China’s stubborn adherence to a Covid-free pipe dream. The recovery trimmed the index’s loss for the week to 130.5 points or 1.8 per cent.

There was little in the overnight action to explain the strength of today’s rally. Wall Street finished mixed in choppy action. A late bout of buying may have been enough to encourage Australian value investors to dip their toes and some short-sellers to cover their positions.

The Dow slashed a 500-point intraday loss to 104 points or 0.33 per cent. The S&P 500 finished 0.13 per cent in the red and on the brink of a bear market. The Nasdaq Composite scraped a slender gain of 0.06 per cent.

“Late comments from San Francisco Fed president Mary Daly… seemed to help a turnaround in equities,” NAB economist Taylor Nugent said.Daly sees no reason to alter the course for 50bps at the next two meetings and reiterated that she wants to see rates at neutral of 2.5% by the end of the year.”

Turmoil in the cryptocurrency world added to investor concerns this week. The TerraUSD “stablecoin” imploded, dragging other digital tokens with it. Stablecoins are supposed to peg 1:1 to the US dollar. Tether, another major stablecoin, fell as low as 95.11 US cents on Wednesday before recouping most of its losses.

The volatility provided an unwelcome backdrop to the launch of Australia’s first crypto exchange-traded funds.

“The meltdown in one of the world’s largest stablecoins has sent shockwaves among traders,” Kunal Sawhney, chief executive of research group Kalkine, said.

“The market appears to have landed itself in a free fall, with a range of top tokens plummeting to new lows. Amidst this meltdown, Australia’s inaugural crypto ETFs have recently begun trading, fuelling debate if it is the right time for novice investors to enter this asset class.”

Today’s improvement in market mood correlated with a rebound in Bitcoin back above US$30,000 a coin. The largest of the digital tokens was lately up 6.6 per cent at US$30,448 after falling as low as US$25,805 on Wednesday night.

Winners’ circle

The day’s best ASX performers were yesterday’s worst. The I.T. sector bounced almost 7 per cent off a two-year low. REITs gained 3 per cent. Both sectors have been pummelled this week by uncertainties over the outlook as rates rise.

“Bargain hunters appear to be scooping up technology stocks following a broader market sell-off,” Kalkine’s Sawhney said.

Several tech stocks reversed much of yesterday’s double-digit declines. Afterpay’s US parent company Block gained 14.99 per cent, Altium 7.14 per cent and Life360 14.33 per cent. Xero bounced 9.44 per cent and Telix Pharmaceuticals 7.61 per cent.

Other standouts included Polynovo +14.04 per cent, Clinuvel +13.46 per cent and Tyro Payments +9.8 per cent. Online beauty products retailer Adore bounced 15.87 per cent from an all-time low.

Goodman Group was the pick of the property stocks, rising 4.02 per cent. Stockland firmed 3.98 per cent, Vicinity Centres 3.95 per cent and HomeCo Daily Needs 3.52 per cent.

Takeover target Link Administration Holdings climbed 8.87 per cent after a recovery in the share price of Canadian suitor Dye & Durham. Link shares collapsed from above $5 on Tuesday to $4.04 yesterday amid questions over whether the acquisition would proceed.

Fuel refiners Ampol and Viva Energy rallied after trading updates yesterday underlined a huge improvement in margins last month. Ampol gained 2.38 per cent. Viva Energy jumped 6.39 per cent.

At the heavyweight end of the market, Macquarie Group rallied 4.51 per cent from a two-month low. CSL rose 3.33 per cent, Wesfarmers 2.46 per cent and Rio Tinto 2.09 per cent.

Doghouse

The gold sub-sector sank to its lowest since mid-February after the yellow metal hit a three-month low. Newcrest declined 0.49 per cent. Evolution Mining shed 0.58 per cent.

Gold Road Resources announced it had moved closer to acquiring ASX-listed DGO Gold after increasing its stake in its target to 20.35 per cent. Gold Road shares eased 2.34 per cent. DGO dropped 7.09 per cent.

An earnings downgrade pulled packager Pro-Pac down 17.91 per cent. The group said results since early April had been below expectations, due to rising costs, labour shortages and bottlenecks in Asia and Europe. Full-year underling profit is expected to be around $5 million.  

Other markets

US equity futures overcame early weakness as Asian markets rebounded. S&P 500 futures rose 38 points or almost 1 per cent.

In Asia, the Asia Dow put on 2.12 per cent, China’s Shanghai Composite 0.68 per cent, Hong Kong’s Hang Seng 1.94 per cent and Japan’s Nikkei 2.54 per cent.

Oil resumed its bull run after a brief pause overnight. Brent crude climbed US$1.65 or 1.5 per cent to US$109.10 a barrel.

Gold overcame early pressure, edging up US$1.10 or less than 0.1 per cent to US$1,825.70 an ounce.

The dollar improved steadily as the session advanced, climbing 0.45 per cent to 68.99 US cents.

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