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The share market logged its longest run of weekly advances since August after wholesale inflation cooled and Wall Street welcomed signs of economic resilience in the face of interest rate rises.
The S&P/ASX 200 rallied 25.5 points or 0.34 per cent this afternoon to a nine-month closing high.
Gains in banks, tech and property stocks and supermarkets helped offset declines in energy producers and gold miners.
What moved the market
The new year rally of 2023 rolled into a fourth week as investors quickly put behind them Wednesday’s unwelcome inflation surprise. Today’s advance extended the index’s gain for a holiday-shortened week to 42 points or almost 0.6 per cent. The Australian benchmark has risen 6.5 per cent since the start of the year.
The week’s only wobble came on the eve of the Australia Day break when an ABS report showed consumer prices increased more than expected last quarter. Hopes for a pause in interest rates were seemingly dashed by the biggest jump in annual inflation since 1990. The odds on another quarter-point rate hike next month jumped to 75 per cent, according to interbank futures.
However, Wednesday’s news seemed little more than fish and chip paper when trade resumed this morning. Overnight gains in the US helped settle jitters. The S&P 500 rallied 1.1 per cent as strong growth figures soothed fears of a hard landing for the economy.
“Confounding those expecting an imminent slowdown in the world’s largest economy, US growth data surprised to the upside overnight. Q4 GDP beat estimates (2.9% vs 2.6% expected). Durable goods rose by 6.3%, while jobless claims fell to a nine-month low (197.5k vs 206.75k last week),” Tony Sycamore, market analyst at IG, wrote in emailed commentary.
Also cheering investors was a drop in wholesale inflation. The producer price index rose 0.7 per cent in the December quarter, the weakest growth since Q1 2021. The annual change in prices was 5.8 per cent, down from a peak of 6.4 per cent the previous quarter. The report bodes well for this quarter’s consumer inflation reading.
Winners’ circle
Tech and battery metal miners provided most of today’s best returns. Megaport rallied 7.22 per cent, Liontown Resources 5.19 per cent and WiseTech 2.64 per cent.
Steelmaker BlueScope climbed 2.86 per cent to its highest since May after repaying US$300 million of debt early and increasing its loan facility. Collectively, the transactions will reduce the firm’s financing costs.
Also strong were Karoon Energy +4.31 per cent, Goodman Group +2.63 per cent and HUB24 +2.61 per cent.
Record quarterly iron ore shipments briefly lifted Fortescue Metals to a 17-month high before a fade to +0.04 per cent. December-quarter shipments of 49.4 million tonnes sealed a record half of 96.9 million tonnes, up 4 per cent on H122. Costs were 3 per cent lower than the previous quarter. Full-year shipment and cost guidance was unchanged.
The other members of mining’s ‘Big Three’, BHP and Rio Tinto, gained 0.61 and 0.37 per cent, respectively.
Takeover target Origin Energy put on 0.68 per cent after raising earnings guidance to reflect higher natural gas and electricity profits. The company expects full-year underlying earnings of $600-$700 million, up from previous guidance of $500-$650 million. Brookfield and EIG are carrying out due diligence on a potential acquisition of the company.
Another takeover target, Tyro Payments, popped 4.01 per cent to $1.56 after offering suitor Potentia four weeks to improve its offer. Tyro has rejected two non-binding indicative offers of $1.27 and $1.60 per share as undervaluing the business. The company will allow Potentia to carry out due diligence to “develop a significantly improved proposal”.
Strong demand for flow generator devices for treating sleep apnoea helped ResMed raise revenues by 16 per cent last quarter to US$1.034 billion. Operating profit increased 14 per cent despite a 30 bps contraction in gross margin to 56.1 per cent. The share price gained 2.09 per cent.
“During the second quarter, we significantly increased production and delivery of flow generator devices to meet the incredible demand from customers, resulting in strong sales growth in the Americas, and solid overall performance for our business across 140 countries,” CEO Mick Farrell said.
Select Harvests bounced off a 15-year low after reporting its worst almond crop in ten years while global prices weakened. The quality of the grower’s 2022 crop was impacted by wet weather.
The combination of adverse weather and falling world prices cut the value of inventory from $6.80 per kilogram to a forecast $6.15-$6.30. Earnings will take an $18-$22 million hit from the drop. The share price traded as low as $3.62 before bouncing 4.6 per cent to $4.09.
Viva Energy firmed 0.68 per cent after the competition regulator and foreign investment review board cleared the company’s plan to acquire the Coles Express retail business. The transaction is expected to complete next quarter.
Doghouse
Coal stocks slumped after a double-digit decline in the price of coal. New Hope shed 9.03 per cent. Whitehaven gave up 6.64 per cent. Coronado lost 2.37 per cent.
Gold’s first loss in six sessions weighed on miners. Regis Resources lost 4.85 per cent, Newcrest 2.31 per cent and West African Resources 2.98 per cent.
Aside from gold miner Newcrest, the biggest drags at the heavyweight end of the market were Woodside -2.39 per cent, CSL -0.48 per cent and Aristocrat Leisure -0.38 per cent.
Other markets
A mixed session on Asian markets saw the Asia Dow lift 0.47 per cent and Japan’s Nikkei add 0.05 per cent. Hong Kong’s Hang Seng dipped 0.05 per cent. Chinese mainland exchanges remained closed for the Lunar New Year.
US futures sank after a big earnings miss from Intel. S&P 500 futures declined 11 points or 0.28 per cent.
Oil added to an overnight gain of US$1.35. Brent crude advanced 36 US cents or 0.4 per cent to US$87.64 a barrel.
Gold fell for a second session, declining US$8.30 or 0.43 per cent to US$1,921.70 an ounce as the US dollar rallied.
The Australian dollar eased 0.1 per cent to 71.06 US cents.
