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The share market’s losing run stretched to a fourth week despite a partial recovery this session as the major banks rebounded and the miners added to gains.
The S&P/ASX 200 climbed 28 points or 0.39 per cent this afternoon to 7283.6. The rally cut the benchmark’s deficit for the week to 23 points or 0.3 per cent.
The index hit a six-week low on Monday before rising on three out of four subsequent sessions. Upbeat domestic inflation and Chinese economic news mid-week helped offset headwinds from the US.
What moved the market
The market finished on the upswing following a week-long tug of war between its two most heavily-weighted sectors. The materials sector logged a fourth straight rise today, encouraged by an eight-month high in iron ore following signs of a revival in Chinese factory activity. The financial sector pulled in the opposite direction for much of the week before switching sides this session.
Three of the four major banks sank to their lowest yesterday since October. The falls followed the lowest number of private home approvals in a decade and a report earlier in the week showing mortgage arrears were on the rise.
“Two factors shape banking stocks – one is easy to understand and is about rising net interest income when policy interest rates edge higher in the economy. The other force is a little complex, and it is about delinquency and default on loans and slower or even negative credit growth amid economic downturns and high borrowing costs,” Kunal Sawhney, chief executive of research group Kalkine, said.
“The housing sector is under pressure, and so is the mortgage market, which is perhaps one reason Aussie banking stocks aren’t the favourite despite losing their peak valuations.”
Market sentiment was boosted mid-week by a triple dose of market-friendly developments. Reports showed inflation cooled more than expected in January, economic growth softened enough in the December quarter for the Reserve Bank to reassess the outlook for interest rates, and the Chinese economy gathered strength this month after the pandemic slowdown.
Interest rates are back on the agenda next week when the Reserve Bank holds its second policy meeting of the year. The bank is widely expected to raise the cash rate target for a record tenth month in a row by 25 basis points to 3.6 per cent.
“The RBA cash rate futures imply a 75% chance of such an outcome, down from 81% earlier in the week following softer GDP and inflation figures. The case may have diminished slightly for another 25bp hike, but it remains strong enough to almost take as a given, due to inflation remaining over 7%,” Matt Simpson, senior market analyst at City Index, said.
“The odds of a smaller hike or actual pause strike me as slim. But it is such unexpected events that trigger the higher levels of volatility,” he added.
US stocks steadied overnight as investors welcomed calls from a Federal Reserve policymaker for “slow and steady” rates policy. Atlanta Fed President Raphael Bostic pushed back against calls from other Fed officials for a 50 bps rate hike this month. The S&P 500 advanced 0.76 per cent.
Winners’ circle
Several of the big four banks edged off their lowest levels since October. The financial sector slumped yesterday after soft housing approvals implied there will be fewer mortgages to drive profits in coming months.
Commonwealth Bank bounced 0.7 per cent. NAB gained 1.11 per cent. Westpac inched up 0.42 per cent. ANZ rallied 0.59 per cent from an eight-week low.
The major miners rose for a fourth day as iron ore prices hit an eight-month peak in China. The most-traded ore contract on the Dalian Commodity Exchange firmed 0.87 per cent this afternoon, adding to yesterday’s 1.56 per cent rise.
Rio Tinto advanced 1.6 per cent. BHP tacked on 0.56 per cent. Lithium, coal and some gold miners also made headway. Liontown Resources jumped 13.19 per cent, Ramelius 5.58 per cent and New Hope 1.41 per cent.
Norwest Energy firmed 4.69 per cent after Mineral Resources extended its takeover offer for the firm, declaring the deal on the table “best and final”. Mineral Resources said it held voting power for approximately 70 per cent of Norwest shares. MinRes shares declined 0.68 per cent.
Downer EDI finished flat after the sudden resignation of Chair Mark Chellew. The chairman’s departure follows the exit of Chief Financial Officer Michael Ferguson earlier this week. The engineering group’s shares have fallen heavily this year following an accounting scandal and two downgrades to its full-year profit forecast.
Doghouse
OZ Minerals dipped 0.04 per cent after an independent expert concluded a $9.6 billion takeover offer from BHP was fair and reasonable. Grant Samuel said the offer of $28.25 per share was in the best interests of shareholders in the absence of a superior proposal. Oz directors have unanimously recommended the offer.
Nickel Industries dropped 0.48 per cent to $1.03 after raising $34.6 million from shareholders at $1.02 per share.
Dividend payments continued to sap the market. Ampol shed 5.77 per cent as it traded ex-dividend. Nine Entertainment lost 2.36 per cent. Treasury Wine Estates shed 1.38 per cent.
Other notable falls included Capricorn Metals -3.97 per cent, Silver Lake Resources -3.74 per cent and Centuria Capital -3.67 per cent.
Other markets
A positive session on Asian markets saw the Asia Dow gain 1.14 per cent, China’s Shanghai Composite 0.17 per cent, Hong Kong’s Hang Seng 0.71 per cent and Japan’s Nikkei 1.59 per cent.
US futures faded after Federal Reserve Governor Christopher Waller said recent data showed the central bank had not made as much progress on cooling inflation as it previously thought. S&P 500 futures declined seven points or 0.18 per cent.
Brent crude gave back some of last night’s 44 US cent rally, falling 24 US cents or 0.3 per cent to US$84.51 a barrel.
Gold reversed most of last night’s US$4.90 drop, rising US$3.70 or 0.2 per cent to US$1,844.20 an ounce.
The dollar bounced 0.2 per cent to 67.44 US cents.
