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Australian shares sealed a third straight winning week despite fizzling this session as falling commodity prices dented mining stocks.  

A choppy session saw the S&P/ASX 200 finish virtually unchanged. The Australian benchmark put on a tenth of a point or less than 0.01 per cent.

Strength in defensive heavyweights Wesfarmers, Woolworths and property giant Goodman Group helped offset declines in resource stocks.

What moved the market

The market has steadily put the September slump behind it, building steadily for most of this week after NSW exited lockdown and ahead of Melbourne’s emergence. For the week, the ASX 200 put on 53.5 points or around 0.7 per cent, much of it in baby steps. The index has bounced more than 3 per cent in three weeks since the start of the month.

This week’s gains came as Wall Street broke fresh ground for the first time in almost two months. The Dow hit a new peak yesterday. Overnight, the S&P 500 firmed 0.3 per cent, joining the blue-chip average in record territory.

“While it was a wobbly start of trading on Wall Street last night, the major stock indices ended mostly higher, enough for the S&P 500 index to surpass a previous peak achieved seven weeks ago,” Kalkine Group CEO Kunal Sawhney said. “The S&P 500 index was powered by optimistic numbers on the labour market and a spate of robust corporate results.”

Earnings also provided much of the juice for the ASX’s advance this week. The annual general meeting and quarterly reporting season gave fresh impetus to companies as diverse as Dexus, Perpetual, Wesfarmers and Healius.

The market overcame early weakness this session after struggling Chinese property developer Evergrande averted a weekend default and the Reserve Bank intervened  to rein in surging rates. The major miners pared their losses after Chinese media reported Evergrande paid US$83.5 million in dollar bond interest a day before a 30-day deadline. The market has been haunted by fears of the chilling effect on demand for raw materials if China’s property boom comes to a messy end.

“As Australia relies considerably on exports to China, investors appear concerned over offshore bond defaults from China’s leading property developer,” Kalkine’s Mr Sawhney said.

“With the property sector representing nearly a quarter of China’s economic output, the collapse of the company could send shock waves across the commodity sector,” ANZ senior commodities strategist Daniel Hynes said.

Defensive sectors rallied after the RBA acted to contain soaring interest rates. The central bank this morning offered to buy $1 billion in government bonds. The offer was the central bank’s first attempt to defend its 0.1 per cent three-year yield target since February. The intervention came after the three-year rate passed 0.17 per cent. The yield promptly dropped more than five basis points.

Winners’ circle

The RBA’s mid-morning intervention on rates boosted stocks that compete with bonds for institutional investment flows – so-called bond proxies. Wesfarmers climbed 3.17 per cent, Goodman Group 1.13 per cent and Transurban 0.95 per cent. Supermarkets Woolworths and Coles added 1.64 and 0.67 per cent, respectively. CSL gained 0.41 per cent.

Qantas hit a pandemic-era peak before trimming its rise to 0.18 per cent after announcing it will resume international flights earlier than planned. The move follows a federal and NSW government decision to reopen borders on November 1 and for NSW to scrap quarantine requirements for fully-vaccinated arrivals.

IAG edged up 1.39 per cent after reaffirming full-year guidance. The insurer said it recorded mid single-digit growth in written premiums over the first quarter.

Analytics software firm Nuix gained 2.69 per cent on news former Infomedia chief Jonathan Rubinsztein will join as CEO. Rubinsztein will replace Rod Vawdrey, who stood down following the firm’s disastrous ASX debut. Shares that listed at $5.31 and quickly hit $11.85 traded today at $3.03.

Doghouse

Mining stocks retreated after some of the air came out of ballooning commodity prices. Industrial metals and iron ore retreated amid fears of a plunge in demand if Evergrande, China’s second-largest developer, collapses. The spot ore price skidded 5.6 per cent, copper 3.8 per cent, aluminium 5.2 per cent and nickel 4.9 per cent.

BHP declined 2.16 per cent, Rio Tinto 1.82 per cent, Woodside Petroleum 2.84 per cent and Fortescue Metals 0.69 per cent. Champion Iron shed 3.35 per cent, Mineral Resources 4.02 per cent and Beach Energy 3.83 per cent.

Lynas Rare Earths sank 8.06 per cent following a sharp Covid-affected slump in sales revenues last quarter. Revenues dropped to $121.6 million from $185.9 million over the previous three months amid limited shipping availability and plant shutdowns due to staff isolating.

The major banks retreated with interest rates. CBA dropped 0.07 per cent, ANZ 0.11 per cent, NAB 0.14 per cent and Westpac 0.35 per cent.

Rail freight operator Aurizon skidded 6.17 per cent after announcing it will acquire One Rail Australia from Macquarie Asset Management for $2.35 billion. The deal includes bulk rail haulage and general freight assets in South Australia, NSW, Queensland and the Northern Territory. The purchase will be funded from existing debt and new committed debt facilities.

Other markets

Most Asian markets advanced, but gains were limited. China’s Shanghai Composite rose 0.1 per cent, Hong Kong’s Hang Seng 0.44 per cent and Japan’s Nikkei 0.36 per cent. The Asia Dow dipped 0.03 per cent.

US futures pared early losses. S&P 500 futures were recently off five points or 0.1 per cent.

Brent crude faded 47 US cents or 0.56 per cent to US$84.14 a barrel.

Gold firmed US$5.50 or 0.3 per cent to US$1,787.40 an ounce.

The dollar rallied 0.15 per cent to 74.74 US cents.

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