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A busy day of takeover action ended with the share market modestly higher as US futures and bond yields rallied.
The S&P/ASX 200 traded through a 66-point range before finishing six points or 0.1 per cent ahead.
The market overcame an early plunge as gains in health and property stocks were bolstered by a reversal in most of the big banks. Tech and mining stocks dragged.
What moved the market
Today’s action continued a run of choppy, broadly horizontal moves as the market adjusts to the idea of higher interest rates as inflation gains traction. ThinkMarkets analyst Carl Capolingua said the market hung in well despite pops in both US and Australian bond yields.
“The last few weeks have been all about higher rates spooking stocks. So, to see our market fairly firm even as yields edged higher, you start to think that investors have made peace with the idea that rates may continue to adjust higher in the short term,” he said.
“Rates are going up on economic growth expectations, and that’s good for stocks. So maybe we’re beginning to focus more on the positives during this adjustment process. I think that once this move is done, markets are going to grow increasingly comfortable that interest rates are still historically very low. Then we can focus more on the growth story going forwards.”
A string of acquisitions provided much of the day’s excitement. AGL will become the largest owner of wind and solar energy generation in Australia after joining a $2.7 billion deal to take over Tilt Renewables’ Australian operations. Evolution Mining declared a friendly takeover of Canada’s Battle North Gold. Medicinal cannabis companies Elixinol and Creso Pharma also announced deals (more on all below).
Positive US futures helped the market overcame an early dive. Dow futures climbed 64 points. S&P 500 futures rose 0.14 per cent and Nasdaq futures 0.15 per cent.
Tech stocks wilted as bond yields rallied. The Australian ten-year yield jumped as much as ten basis points to 1.82 per cent ahead of a speech by Reserve Bank Governor Philip Lowe. The RBA chief reiterated that the central bank will keep official rates low “until we have achieved our goals for full employment and inflation”.
“The unemployment rate of 6.4 per cent is too high and the economy is operating well short of its capacity,” Lowe told a virtual conference this morning. “Inflation and wages growth are also both lower than we would like. While we are expecting further progress to be made towards full employment and the inflation target, it is going to take some time before we reach our goals.”
Fortescue Metals led a retreat in the big three iron ore miners after bringing forward its target to achieve carbon neutrality. Chair Andrew Forrest said the company would reach its target ten years early in 2030 by developing green electricity, hydrogen and ammonia projects. The share price slumped 4.1 per cent following a drop in ore prices on Friday. Rio Tinto shed 2.2 per cent and BHP 0.2 per cent.
Winners’ circle
A burst of takeover action met with a mixed response from shareholders. Evolution Mining climbed 2.5 per cent on news the gold miner will buy Canadian outfit Battle North for $354 million. The acquisition has the support of Battle North’s board.
The biggest deal of the day saw AGL‘s part-owned Powering Australian Renewables (PowAR) and Mercury NZ swoop on Tilt Renewables. A $2.7 billion deal will see Mercury take Tilt’s NZ assets, while PowAR takes the Australian business. AGL will contribute $431 million. Shares in AGL inched up 0.1 per cent. Tilt gained 15 per cent and Mercury NZ 4.6 per cent.
Industrial hemp grower Elixinol climbed 7.7 per cent after swooping on Germany’s CannaCare Health. Elixinol will pay nine million euros in cash and shares up-front, with additional earn-out payments up to a maximum of 24 million euros. Creso Pharma shed 4.8 per cent following news it will acquire Canadian psychedelic-assisted psychotherapy firm Halucenex through a mix of shares and cash.
Goodman Group was the best of the index heavyweights, rising 2.1 per cent. Newcrest gained 1.4 per cent, Woodside 1 per cent and CSL 1 per cent. Telstra put on almost 1 per cent, Woolworths 0.5 per cent and Aristocrat Leisure 0.1 per cent.
Westpac led a mid-morning reversal in the banks, advancing 0.5 per cent. ANZ gained 0.6 per cent and NAB 0.15 per cent. CBA eased 0.1 per cent.
A reshuffle in the ASX 200 announced by S&P Dow Jones Indices produced a string of winners. Among companies coming in next Monday, Codan gained 4.9 per cent, Champion Iron 1.5 per cent, HUB24 11.2 per cent, Nickel Mines 4.2 per cent, Nuix 6.4 per cent and Pilbara Minerals 3.9 per cent.
Doghouse
The growth stock-heavy tech sector, which closely tags the Nasdaq, slumped 1.9 per cent. Afterpay dropped 4.5 per cent, Nearmap 2.3 per cent and Altium 2.3 per cent. On Friday, the Nasdaq Composite fell 0.59 per cent, bucking a broader US market rise as investors favoured cyclicals.
While the miners and Afterpay were the biggest drags, also weak were Wesfarmers -0.7 per cent, Transurban -0.7 per cent and Brambles 0.2 per cent.
The reshuffle in the ASX 200 saw declines in most of the companies scheduled to leave the index next Monday. Bravura Solutions lost 3 per cent, GWA 7.6 per cent, Sandfire Resources 4.2 per cent and Smartgroup 4.2 per cent. Service Stream and Tassal Group bucked the trend, rising 2.5 and 0.3 per cent, respectively.
Other markets
A mixed but broadly positive session on Asian markets saw the Asia Dow gain 0.14 per cent, Hong Kong’s Hang Seng 0.58 per cent and Japan’s Nikkei 0.19 per cent. China’s Shanghai Composite dropped 0.61 per cent.
Oil and gold began the new week on the front foot. Brent crude soared 51 cents or 0.7 per cent to US$69.73 a barrel. Gold rallied $4.60 or 0.3 per cent to US$1,724.40 an ounce.
The dollar faded 0.2 per cent to 77.46 US cents.
