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A bright final session sealed a second straight weekly advance for the ASX as the repair-work continued following last month’s slump.

The S&P/ASX 200 rallied 50 points or 0.7 per cent to its strongest close of the month. Today’s advance secured a gain for the week of 42 points or almost 0.6 per cent.

Technology and mining stocks led after Wall Street staged its biggest rally in seven months. BHP, Afterpay and Macquarie Group were the largest contributors to the advance. A production downgrade weighed on Rio Tinto.

What moved the market

The mood on financial markets lightened as the week went on. Wall Street took flight overnight after upbeat earnings overshadowed strong inflation data mid-week and confirmation the Federal Reserve is preparing to reduce support for the economy. The S&P 500 surged 1.71 per cent.

“Several market analysts were initially worried that the quarterly earnings could be disappointing this time. Solid bank earnings have revived hopes of a robust earnings season similar to the second quarter,” Kalkine Group CEO Kunal Sawhney said.

Down under, two days of gains at the end of the week outweighed a three-day decline through the first half of the week. The market rallied yesterday after September employment data showed the hit from lockdowns may not be as severe as economists feared.

“It seems the investors have already digested the latest employment report and looking past Evergrande’s woes continuing with fresh downgrades in China,” Mr Sawhney said.

“The share market appears to be giving a positive reaction to the stronger-than-expected quarterly earnings results in the US. A part of the credit also goes to easing restrictions in Sydney and Melbourne, which has revived hopes of sooner economic recovery from the pandemic-induced slowdown.”

Confidence was the key theme this week, according to Westpac senior economist Elliot Clarke. Business confidence jumped 19 points to +13, well above the long-term average. Westpac’s own weekly measure of consumer sentiment also came in above pre-pandemic levels.

“The promise of an end to lockdown conditions saw unemployment expectations fall in the month; and, relative to its long-run average, this series is pointing to a strong recovery in employment and a tight labour market,” Mr Clarke said.  

Mr Clarke expects the dollar to outperform against the greenback for the next few months as the US currency responds to the Fed’s taper plans and the Aussie is supported by rising commodity prices.

“Currencies heavily exposed to global momentum and economic development such as our own Australian dollar and, more notably, China’s Renminbi are set to outperform this trend,” he said.

The dollar benefitted today from its global position as a “commodity currency”, rising above 74 US cents for the first time in a month. The Aussie was last ahead 0.12 per cent at 74.22 US cents.

Winners’ circle

BHP climbed 2.8 per cent after shareholders backed the miner’s climate plan. A vote at last night’s annual general meeting in London was 83 per cent in favour of the Climate Transition Action Plan to reduce emissions by at least 30 per cent by 2030.

OZ Minerals put on 5.17 per cent, Lynas Rare Earths 2.51 per cent and Fortescue Metals 1.96 per cent.

Tech was the session’s other standout as borrowing costs continued to retreat. Appen gained 3.54 per cent, Nanosonics 3.67 per cent, Nearmap 3.08 per cent and Afterpay 1.74 per cent.    

Travel and tourism companies rose after New South Wales scrapped compulsory quarantine measures for fully-vaccinated travellers. Flight Centre added 3.77 per cent, Webjet 4.05 per cent and Corporate Travel Management 2.69 per cent.

Qantas climbed 1.97 per cent after securing $802 million for surplus land at Mascot in Sydney and announcing it will restart international flights two weeks earlier than originally planned on November 1. The funds will be used to reduce debt and aid the airline’s pandemic recovery.

Macquarie Group steered the financial sector higher, charging 3.66 per cent to a new high. The big four improved as the session advanced. Commonwealth Bank gained 0.36 per cent, NAB 0.24 per cent, ANZ 1.05 per cent and Westpac 0.47 per cent.

Other heavyweight advances included Woolworths +0.88 per cent, Wesfarmers +0.77 per cent and Woodside +0.76 per cent.

Doghouse

A production downgrade pulled Rio Tinto down 0.91 per cent. The miner lowered its Pilbara full-year iron ore shipment guidance to 320-325 million tonnes from 325-340 million tonnes. Production was impacted by delays in completing a new greenfield mine and a brownfield replacement project amid a tight labour market.

Treasury Wine Estates declined 5.37 per cent after warning business was taking longer to recover from the pandemic than the company originally expected. While retail and e-commerce channels remained strong, luxury channels continued to be impacted. The company told today’s AGM it was also experiencing logistical and supply chain issues, including shipping delays.

IAG slipped 3.15 per cent after the corporate regulator launched civil proceedings alleging the insurer failed to pass on discounts to customers. The proceedings relate to home, motor, caravan and boat insurance sold between 2014 and 2019 and affect approximately 596,000 customers. IAG self-reported the issue to the Australian Securities and Investments Commission (ASIC) and is working on remediation.  

Pendal Group sank 11.51 per cent after reporting net outflows of $2.3 billion in funds under management last quarter. CEO Nick Good said there was “significant volatility” in client sentiment during the quarter.

A ratings downgrade from Bell Potter dragged Elders down 4.79 per cent. Harvey Norman dropped 2.95 per cent as it went ex-dividend.

Other markets

A positive session on Asian markets saw the Asia Dow advance 1.14 per cent, Hong Kong’s Hang Seng 0.83 per cent, Japan’s Nikkei 1.39 per cent and China’s Shanghai Composite 0.29 per cent.

S&P 500 futures firmed 17 points or 0.38 per cent.

Oil extended overnight gains. Brent crude tacked on 65 US cents or 0.77 per cent at US$84.65 a barrel.

Gold retreated US$2.30 or 0.13 per cent to US$1,795.60 an ounce.

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