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The share market’s recent strong run brought up a fresh seven-week high before caution set in ahead of tonight’s US interest rate decision.
The S&P/ASX 200 hit 7011.7, its highest since September 13, then more than halved its gain.
The index finished 10 points or 0.14 per cent ahead. Today’s rally was the seventh in the last eight sessions.
Gains today in resource stocks and utilities helped offset weakness among tech and property stocks.
What moved the market
Optimism that the current interest rate cycle is slowing kept stocks on the upswing despite doubts about tonight’s rate call in the US. The Federal Reserve is certain to raise the target federal funds by another three-quarters of a percentage point, but the market is looking for confirmation of smaller hikes from next month.
“We’re looking for a little bit of guidance,” Victoria Greene, chief investment officer at G Squared Private Wealth, told CNBC. “75 is expected, that’s going to hit, but what’s the forward guidance is going to be? It’s all about what’s to come and what is the pace of the next hikes.”
October was the Dow‘s strongest month since 1976. The rally caught light after the Wall Street Journal reported Fed officials were ready to take their foot off the rates accelerator. Australian investors will find out in the early hours of tomorrow morning whether the newspaper’s information was correct.
Traders have also been comforted by generally positive earnings seasons in both the US and Australia. Aside from some high-profile misses in the US tech space, earnings so far have yet to show major damage from a slowing economy.
“Sentiments have undeniably improved simply because the market participants have yet to see signs that the Aussie or the global economy is in deep trouble. Corporate revenues have reflected a mixed trend, which is not unusual, and this can often happen even during normal phases with no inflationary pressures. It is just that some investors have started looking beyond the much-celebrated tech sector, which is why the Dow has recently shone brighter than its peers,” Kunal Sawhney, CEO of research group Kalkine, said.
The prospect of smaller rate hikes has pulled the US dollar from a 20-year high, easing pressure on dollar-denominated commodities. Iron ore, metals and crude oil rallied overnight, boosting Australian miners and energy producers.
Gains in resource stocks helped the market shrug off soft US leads and downbeat economic data. The S&P 500 retreated 0.41 per cent overnight as a two-day Federal Reserve meeting got underway.
Today’s economic data underscored the impact of this year’s run of rate hikes. Building approvals slumped 5.8 per cent in September. The Australian Industry Group’s manufacturing PMI fell into contractionary territory, dropping 0.6 points to 49.6.
Winners’ circle
Resource stocks provided most of the day’s best returns. Coal miner Coronado jumped 8.81 per cent in the wake of Monday’s trading update.
Lithium developer Lake Resources surged 5.19 per cent after a demonstration plant in Argentina achieved 80 per cent lithium recoveries. Plant optimisation work was underway, with first samples expected to ship within two weeks.
Ramelius Resources put on 5.16 per cent, Whitehaven Coal 4.15 per cent and Sandfire 4.14 per cent.
Among the heavyweights, BHP put on 2.13 per cent, Newcrest 1.59 per cent and Fortescue Metals 1.48 per cent.
Rio Tinto firmed 2.36 per cent after securing additional support for its pursuit of Canada’s Turquoise Hill Resources. The miner also said its offer of C$43 per share was best and final.
Energy stocks lifted following reports Iran planned to attack Saudi energy infrastructure. Brent crude climbed 2 per cent overnight and another US$1.07 or 1.1 per cent this afternoon to US$95.69 a barrel.
Woodside rallied 1.2 per cent to a four-year high. Beach Energy tacked on 0.92 per cent. Santos gained 0.76 per cent.
Doghouse
The real estate investment trust sector’s seven-session winning run ended with a fall of 1.65 per cent. Sector heavyweight Goodman Group dropped 3.06 per cent despite reporting a 99 per cent occupancy rate and 4 per cent growth in net property income through the first quarter. The firm said it remained “cautious and patient given market volatility, geopolitical risks and a slowing economy”.
Elsewhere in the sector, Cromwell Property dropped 4.83 per cent, Stockland 2.76 per cent and Dexus 2.27 per cent.
CSL retreated 0.19 per cent after striking a deal for exclusive access to US respiratory vaccine specialist Arcturus Therapeutics’ next-generation mRNA technology. CSL will pay US$200 million to license Arcturus’s tech for Covid and flu vaccines.
“This collaboration is an exciting opportunity to complement CSL’s own next generation mRNA program with a partner who developed a platform to deliver late stage clinical supplies at scale,” CSL Chief Operating Officer Paul McKenzie said.
Packager Amcor declined 4.3 per cent after lowering its adjusted earnings outlook to reflect strength in the US dollar. The company reaffirmed its full-year guidance, but lowered its expectations for adjusted earnings per share on a reported basis to 77-81 US cents from previous guidance of 80-84 US cents.
Vulcan Energy eased 1.87 per cent after expanding its footprint into France. The miner is targeting the French side of the Rhine Valley following positive sampling results. The company has established a French subsidiary and applied for an exploration licence.
The tech sector trimmed a two-session advance. Xero shed 3.42 per cent, Megaport 2.64 per cent and WiseTech 2.5 per cent.
Other markets
Asian markets mostly improved ahead of tonight’s Fed rates verdict. China’s Shanghai Composite put on 0.88 per cent, Hong Kong’s Hang Seng 1.74 per cent and the Asia Dow 0.93 per cent. Japan’s Nikkei dipped 0.15 per cent.
US futures nudged higher. S&P 500 futures were recently ahead ten points or 0.27 per cent.
Gold added to last night’s 0.6 per cent rally, rising US$3 or 0.18 per cent to US$1,652.70 an ounce.
The dollar firmed 0.26 per cent to 64.13 US cents.
