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A six-month high in tech stocks and promising signals from US equity futures helped the share market rise for the first time in a week.

The S&P/ASX 200 rallied 29 points or 0.39 per cent despite mixed corporate earnings and further down-pressure on the battered mining sector.  

Gains in Afterpay, Commonwealth Bank and CSL offset declines in Fortescue Metals, Rio Tinto and Telstra.

What moved the market

A new week brought a revival in risk appetite following last week’s five-session freefall. The S&P/ASX Emerging Companies Index – a barometer for the speculative end of the market – jumped 2.36 per cent as oil, US futures and other risk assets rallied. The Small Ords bounced 1.15 per cent.

A positive end to a losing week in the US, plus hints of more to come tonight, helped the wider market overcome a mid-morning wobble. The ASX 200 started well, then came within three points of giving up all of its gain before kicking on as US futures firmed.

S&P 500 futures were last up 16 points or 0.37 per cent following a strong session on Asian markets.  The Asia Dow bounced 1.55 per cent, China’s Shanghai Composite 1.48 per cent, Hong Kong’s Hang Seng 1.64 per cent and Japan’s Nikkei 1.82 per cent.

The local market took its cues from a revival in US growth stocks. The tech sector climbed 1.78 per cent to its highest since February when the pandemic rush to growth stocks peaked. The sector fell out of favour as bond yields rallied, but has come back onto investors’ radars since borrowing costs peaked in March.

Appen led the pack with a rise of 7.09 per cent. Next best were Nearmap +6.87 per cent, Nuix +4.74 per cent and Afterpay +2.7 per cent.

The market entered the last full week of the corporate earnings season with high hopes after last week’s slump.

“Over 50 companies are expected to report their earnings this week, including some big shots like Ramsay Health Care, Afterpay, Woolworths, Qantas, Wesfarmers, Appen and Fortescue Metals,” Kalkine Group CEO Kunal Sawhney said.  

“So far, some striking attributes of the earnings season have been an avalanche of dividend payouts and a rush of share buybacks announced by several blue-chip players. It will be interesting to see this week if the companies will continue to reward shareholders with dividend hikes and buybacks or Delta variant concerns will prompt them to keep shareholders returns limited.” 

The day’s economic data reinforced the impact of lockdowns on activity. Markit’s composite business purchasing managers’ index fell to 43.5 this month from 45.2 in July, according to preliminary data. Services sector activity dropped to 43.3 from 44.2. Manufacturing growth slowed to a 14-month low of 51.7 from 56.9.

Winners’ circle

Record fund inflows helped lift property investor Charter Hall 6.49 per cent to a new peak. The company said its funds under management grew $11.7 billion last financial year.

Utility Spark Infrastructure rallied 1.81 per cent to $2.82 on news the board had agreed to be acquired for $2.95 per share by a consortium including US private-equity firm Kohlberg Kravis Roberts and the Ontario Teachers’ Pension Plan Board. The board rejected two previous offers from the consortium at lower prices.

Lynas Rare Earths climbed 3.48 per cent on news vaccination rates among its Malaysian employees had reached 98 per cent (first dose) and 94 per cent (second dose). The company’s Malaysian plant has been running at reduced rates to comply with government guidance.

Aside from Afterpay, the best of the heavyweights were Aristocrat Leisure +2.24 per cent, Newcrest +1.5 per cent and Commonwealth Bank +0.91 per cent.

Mining stocks were mixed following tentative rebounds in iron ore and metals on Friday. Last week’s biggest weight on the index, BHP, eked out a rise of 0.27 per cent. Rio Tinto fell another 0.5 per cent and Fortescue Metals 4.27 per cent. Pilbara Minerals jumped 11.39 per cent.

“Commodity markets appear to be on tenterhooks with the fast-spreading Delta variant, which has diminished demand expectations while triggering economic growth concerns,” Kalkine’s Mr Sawhney said. 

“In the coming days, the tone in the commodity market is expected to be set in large by China’s battle to bring the Delta COVID-19 outbreak under control, with the country being the world’s top raw materials buyer.”  

Healius climbed 1.94 per cent during a busy session in the healthcare sector on news Virtus Health will buy its IVF business for $45 million. Virtus shares entered a trading halt while it raises funds for the acquisition.

Doghouse

Sonic Healthcare retreated 2.76 per cent from record levels despite a 149 per cent surge in full-year net profit, thanks largely to coronavirus testing. The pathology company’s earnings jumped 81 per cent to $2.6 billion. Managing Director and CEO Dr Colin Goldschmidt said the firm was actively considering acquisitions.   

A profit miss and a cautious outlook helped pull NIB Holdings down 11.03 per cent.
While the health insurer declared an 84.5 per cent leap in full-year net profit to $160.5 million, the result fell short of the $168 million anticipated by analysts polled by Bloomberg. Managing Director Mark Fitzgibbon said the pandemic continued to muddy the outlook for the year ahead.

Ampol declined 4.76 per cent as a $2 billion bid for Z Energy overshadowed improved half-year earnings and profit. The fuel supplier offered NZ$3.78 per share for its New Zealand rival, a 35 per cent premium to Z Energy’s price on July 26 before news of Ampol’s interest leaked.

The Australian company raised its replacement cost operating net profit 78 per cent to $205 million. Z Energy has granted its suitor four weeks for exclusive due diligence.

Childcare operator G8 Education sagged 5.71 per cent after warning lockdowns were starting to impact occupancy in the eastern states. The company said the hit to earnings was not material in July but downside risks increased this month. The warning took the edge off news the company swung back into profit last half.

Among other companies reporting, Event Hospitality rose 6.17 per cent, Michael Hill 1.82 per cent, Prospa 14.57 per cent, Latitude Group 3 per cent and McGrath 3.77 per cent. Reliance Worldwide eased 1.52 per cent, Cooper Energy 2.44 per cent, oOh!media 4.62 per cent and Chorus 2.92 per cent.

Aurizon sank 4.21 per cent and Super Retail Group 4.62 per cent as they traded without dividends.

Other markets

Oil pushed for its first advance in eight sessions. Brent crude rebounded US$1.31 or 2 per cent to US$66.49 a barrel.

Gold rose US$5.50 or 0.3 per cent to US$1,789.50 an ounce.

The dollar bounced 0.3 per cent to 71.59 US cents.

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