Join our daily newsletter At The Bell to receive exclusive market insights
The share market’s winning streak ended at four as weak US leads, mixed commodity prices and an expansion in Victoria’s Covid cluster depressed buying interest.
The S&P/ASX 200 kept a fifth straight advance within reach for much of the session before fading to a loss of 23 points or 0.32 per cent, finishing near a session low. The index hit a two-week high of 7136.4 before lunch and closed at 7092.5.
What moved the market
A decline in bond yields helped growth stocks and bond proxies. Mining stocks resumed their sell-off following yesterday’s brief pause. Commonwealth Bank shares passed $100 for the first time.
Australian bond yields followed their US counterparts lower as the inflation worries that triggered sporadic volatility this year continued to ebb. The yield on ten-year Australian government bonds fell four basis points to 1.6 per cent this morning, their lowest in two months, but recovered as the session advanced. The stock market gave up its morning rally as yields climbed.
The improvement in risk appetite in recent sessions was underscored by a fresh high in the S&P/ASX Emerging Companies index, which tracks the speculative end of the market. The index rallied 1.21 per cent this session, surpassing its old January high. The Small Ords rose 0.2 per cent.
Headwinds this session included soft leads from Wall Street and commodity markets, as well as news of an increase in the Melbourne Covid cluster. Victorian health authorities reported six new local cases this morning, swelling the cluster to 15. Acting Premier James Merlino said the next 24 hours would be critical.
“It’s good that everyone is linked at this stage, but we are concerned about the number and also about the kind of exposure sites,” he said.
A rise in US futures partly offset modest overnight losses. S&P 500 futures climbed 14 points or 0.33 per cent. Overnight, the index slipped 0.21 per cent following mildly disappointing economic data.
Here, first-quarter GDP expectations were boosted by a stronger-than-expected seasonally-adjusted 2.4 per cent bump in construction work. The increase was driven by residential building, which expanded 5.1 per cent. Economists had expected an increase closer to 2 per cent.
Winners’ circle
The rate-sensitive tech sector led the ASX advance, rising 1.11 per cent to a two-and-a-half-week peak. The WAAAX leadership group all rose. WiseTech climbed 3.06 per cent, Afterpay 0.87 per cent, Altium 2.22 per cent, Appen 0.07 per cent and Xero 1.51 per cent.
“Inflation fears seem to be subsiding a bit,” Kalkine Group CEO Kunal Sawhney said. “Concerns about high inflation forcing the US Fed to opt for interest rate hikes eased lately after a chorus of Fed officials reiterated that the recent upsurge in inflation would be transitory. As the Fed’s soothing words put investors’ tapering worries to rest for the time being, the US dollar hovered near four-month lows on Tuesday.”
Utilities and communications were the next-best performers as investment funds flowed from the bond market into traditional equity alternatives. AusNet climbed 1.16 per cent, AGL Energy 0.73 per cent, APA Group 0.42 per cent and Telstra 0.29 per cent. Brambles gained 0.65 per cent and Wesfarmers 0.71 per cent.
Commonwealth Bank touched a record $100.30 before fading to a loss of 0.05 per cent at $99.58. ANZ put on 0.18 per cent. Westpac added 0.27 per cent. NAB eased 0.22 per cent.
Gold stocks rallied after the yellow metal burst through the US$1,900 technical resistance level. Gold was last up $4.20 or 0.23 per cent at US$1,902.40 an ounce. Regis Resources climbed 3.92 per cent, Silver Lake Resources 3.06 per cent and Newcrest 1.37 per cent.
An increased final dividend helped data tester ALS hit fresh highs despite reporting a 1.5 per cent drop in full-year underlying net profit after tax. The company more than doubled its final dividend to 14.6 cents per share from 6.1 cents last financial year to reflect “strong current trading conditions and liquidity position”. The share price soared 12.84 per cent.
News that volumes had rebounded to near pre-Covid levels helped lift AMA Group 10.48 per cent. The panel repairer said business had benefitted from a pandemic-era rotation from public to private transport, wet autumn driving conditions and an increase in domestic driving holidays.
Mosaic Brands bounced 18.26 per cent on news the retail group had renewed working capital and seen a strong rebound in foot traffic. Underlying earnings were expected to increase to $48 million this financial year and $50 million in FY2022. The retailer operates a range of clothing brands, including Noni B, Millers and Katies.
Doghouse
Travel stocks weathered the initial Victorian Covid breakout, but most succumbed to news this morning that the cluster had increased to 15. Corporate Travel Management retreated 1.55 per cent, Qantas 0.85 per cent and Flight Centre 1.33 per cent. Webjet rose 0.6 per cent.
A resources sell-off resumed after a brief pause yesterday. BHP sank 2.38 per cent to its lowest in a month. Rio Tinto declined 2.23 per cent, Fortescue Metals 2.3 per cent and Woodside 1.09 per cent.
“The spurt in commodity prices seen this year appears to be taking a breather after China’s crackdown on speculative trading activity,” Kalkine’s Mr Sawhney said. “China recently intensified a top-down campaign to rein in runaway commodity prices that continue to create pressure on businesses and factories while endangering the country’s hard-fought economic revival from the pandemic,” he added.
Healthcare was second worst of the sectors, paring three days of strong gains. The sector fell 1 per cent this session after touching a five-month high yesterday. Fisher & Paykel dropped 2.75 per cent, ResMed 1.41 per cent, Cochlear 0.82 per cent and CSL 1.06 per cent.
Kogan hit reverse following two days of strong gains since Friday’s downbeat trading update. Shares in the online retailer dived 5.73 per cent.
Other markets
A positive session on Asian markets saw the Asia Dow advance 0.33 per cent, China’s Shanghai Composite 0.48 per cent, Hong Kong’s Hang Seng 0.91 per cent and Japan’s Nikkei 0.45 per cent.
Brent crude improved 16 cents or 0.23 per cent to US$68.63 a barrel.
The dollar climbed 0.52 per cent following this morning’s construction report to 77.9 US cents.
