Cyclical stocks steered the share market higher after unexpectedly strong growth figures underlined the speed of Australia’s economic recovery.
The S&P/ASX 200 rallied 56 points or 0.82 per cent, led by gains in miners, industrials and banks.
What moved the market
Investors found the positives in a soft set of overseas leads. Miners led today’s advance after the US materials sector shone in a falling market. US materials gained 0.6 per cent even as the S&P 500 faded to a loss of 0.81 per cent.
Here, BHP edged to a record close. Rare earths miner Lynas also hit an all-time high. Diversified miner South32 set a 13-month peak.
Tech stocks were the biggest brake on gains as a rotation into beaten-up cyclicals continued. The local tech sector was the biggest winner from the pandemic, almost tripling in value in 11 months as record low interest rates stoked interest in virus-immune growth prospects. The sector has fallen almost 17 per cent since last month’s peak, losing 1.4 per cent today.
“The growth phase of the sector seems to be tapering off amid a global economic revival and vaccine rollouts,” Kalkine Group CEO Kunal Sawhney said. “Market players seem to have already digested this hot space as a potential investment opportunity. Perhaps it is now time to evaluate… undervalued banking and travel stocks, set for a rebound once vaccination takes full charge.”
The pace of the recovery was underlined by news the economy grew a faster-than-expected 3.1 per cent last quarter. Economists had tipped more moderate growth of 2.5 per cent. Year on year, the economy contracted 1.1 per cent, less than the 1.8 per cent expected. Treasurer Josh Frydenberg said the economy had reversed 85 per cent of its pandemic contraction “six months earlier and twice as fast as we expected”.
“This is a very encouraging performance from the Australian economy, given the economic abyss that we were staring into at the peak of this crisis,” he said.
The market added to its gains as US futures hinted at a potential rebound tonight. S&P 500 futures rose 15 points or 0.4 per cent, boosted by positive vaccine news. President Joe Biden this morning announced the US would have enough vaccines to inoculate every adult by the end of May, two months ahead of schedule.
“So long as the Fed retains its max-dovish stance, we should continue to inhabit the sweet zone revelling in the best of both worlds for equities as US vaccinations continue,” Stephen Innes, Chief Global Market Strategist at Axi, said. “A robust economic recovery is well in sight, yet max policy support remains at full throttle on both the fiscal and monetary side. It should make it very difficult to sell this rally with a vengeance as investors are still riding on the cyclical bonanza.”
The big four miners filled most of the top slots on the list of heavyweight risers. Fortescue Metals climbed 5.7 per cent, BHP 3.5 per cent, Rio Tinto 2 per cent and Newcrest 1.6 per cent. BHP eked out a new intraday high and record close. Rio Tinto’s advance came despite news chairman Simon Thompson will stand down at next year’s AGM.
Gold stocks seized on the yellow metal’s first advance in six sessions. Ramelius Resources bounced 13.7 per cent, Silver Lake Resources 7.5 per cent, Perseus 6.5 per cent and Westgold 6.2 per cent.
Rare earths miner Lynas rallied 6 per cent to an all-time high. Diversified miner South32 neared a 13-month peak with a rise of 3.7 per cent. Fertiliser and crop protection specialist Nufarm climbed 7.6 per cent to its highest level since June.
Gains in the banks were more moderate. ANZ put on 2.5 per cent, NAB 1.7 per cent, Westpac 1.5 per cent and CBA 1.1 per cent. Wesfarmers added 0.3 per cent, Transurban 0.5 per cent and Macquarie Group 0.6 per cent.
The technology sector fell back towards last week’s three-month lows following selling pressure on US tech overnight. The Nasdaq Composite lost 1.69 per cent, resuming a downtrend that pulled it 4.9 per cent lower last week.
Afterpay shed 2.2 per cent. The domestic tech sector leader has lost almost a quarter of its value in two weeks. Megaport gave up 3.2 per cent, Nearmap 3 per cent, Xero 2.7 per cent and Altium 2.3 per cent.
Away from tech, heavyweight drags included CSL -1 per cent, Goodman Group -0.5 per cent, Woolworths -1.7 per cent and Brambles -0.2 per cent.
Media group Nine Entertainment faded another 1 per cent from yesterday’s record high following the announcement of a new CEO. Mike Sneesby, currently chief executive of Nine’s Stan streaming service, will replace Hugh Marks at the top of the parent company from the start of next month.
Among stocks going ex-dividend, Orora fell 3 per cent, Bravura Solutions 1.9 per cent, Treasury Wine Estates 1.9 per cent, IOOF 1.2 per cent and Medibank Private 1.1 per cent.
Asian markets improved as the session wore on, rebounding from yesterday’s sell-off. The Asia Dow doubled an early advance to 1.13 per cent. Hong Kong’s Hang Seng put on 1.69 per cent, China’s Shanghai Composite 1.33 per cent and Japan’s Nikkei 0.24 per cent.
Oil edged higher ahead of tomorrow night’s OPEC+ meeting. Brent crude rose 25 cents or 0.4 per cent to $US62.95 a barrel.
Gold marked time after its first rally in six sessions. The yellow metal dipped 30 cents or less than 0.1 per cent to $US1,733.30 an ounce.
A post-GDP bounce in the dollar faded to a loss of 0.02 per cent at 78.22 US cents.