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A mining-led rally helped the ASX 200 regain 7000 after Wall Street welcomed the prospect of political gridlock in Washington reducing the risk of major policy changes.
The Australian benchmark reached the halfway mark 44 points or 0.64 per cent ahead at 7003.
Gold miners soared with the price of the yellow metal. News Corp and NAB were among the heaviest drags following trading updates.
What’s driving the market
US stocks rallied overnight as polling for midterm elections pointed to gains for the Republican Party and the likelihood of a split government. The S&P 500 gained 0.56 per cent, its third straight gain.
“Many agree that a Republican majority would compel the Biden administration to rethink its fiscal spending plan, and it would be no smooth sailing. This one factor can shape the global equity market over the rest of the week, but how the Fed officials react to the latest inflation reading [tomorrow night] can even have a bigger impact on sentiments,” Kunal Sawhney, chief executive of research group Kalkine said.
“There is also this fragile consensus that for a few months after the midterm elections, equity markets exhibit optimism and move higher.”
US futures rose as the early results from polling booths came in largely in line with expectations. S&P 500 futures firmed 11 points or 0.3 per cent.
Wall Street overcame a mid-session wobble overnight amid turmoil on cryptocurrency markets after the world’s two largest exchanges announced an emergency merger. Binance will absorb FTX after the latter reported a “significant liquidity crunch”. FTX appeared to be on the verge of collapse following a surge in withdrawals.
A digital token issued by FTX lost four-fifths of its value overnight. Bitcoin plunged briefly below US$18,000 a coin.
This morning’s rally lifted the ASX 200 above 7000 for the second time in a week, but the market faces technical resistance at these levels.
“The 200-day MA is a big level to break which sits just around the 7,000 highs and trading volumes over the past 4 days have been below average. So this week’s rise into resistance currently lacks a little conviction, even if the bigger picture favours a break higher,” Matt Simpson, senior market analyst at City Index, said.
“I’m on guard for a possible pullback before the anticipated break, with greater buying conviction.”
Going up
Gold miners soared after the yellow metal reclaimed the US$1,700 an ounce level for the first time in more than a month. St Barbara rallied 14 per cent, Regis Resources 11.87 per cent and Capricorn Metals 9.79 per cent. De Grey, Evolution Mining and Perseus all gained at least 8 per cent.
Industry heavyweight Newcrest popped 7.02 per cent as it held its AGM. CEO and Managing Director Sandeep Biswas said a recent acquisition, the Brucejack mine in Canada, generated $109 million in earnings in its first four months under Newcrest.
Other miners to post gains included Rio Tinto +2.37 per cent, BHP +2.35 per cent and Fortescue Metals +2.53 per cent. Champion Iron firmed 5.41 per cent. Beach Energy rallied 4.89 per cent.
Orica jumped 8.41 per cent after reporting a 36 per cent surge in full-year underlying earnings to $579 million. Net profit was $60 million.
Medibank rallied 1.26 per cent after a Russian criminal group began releasing hacked customer data onto the dark web. The health insurer announced earlier this week it would not pay a ransom to prevent the release.
Going down
NAB dropped 2.44 per cent after reporting a contraction in interest margins and warning about an uncertain economic outlook. The bank said higher interest rates and inflation were “likely to challenge some customers”.
The bank’s full-year net profit increased 8.3 per cent to $6.891 billion. Net interest margins declined by six basis points amid intense competition for home loans.
A 15 per cent decline in first-quarter profitability helped drag News Corp down 10.57 per cent. The media group blamed unfavourable currency movements and changes at Amazon for the drop.
“We view neither factor as reflective of core business conditions or of our long-term potential,” News Corp CEO Robert Thomson said.
Coal miners fell after Whitehaven cut its production guidance in the face of persistent flooding on the east coast. Access and haulage roads have been impacted, forcing the miner to transport some workers by helicopter.
The firm lowered its full-year coal production guidance to 19-20.4 million tonnes from a previous forecast of 20-22 million tonnes. The share price lost 9.35 per cent. Fellow east coast coal miner New Hope shed 6.13 per cent.
Travel agent Helloworld slumped 11.1 per cent after Qantas sold its entire shareholding in the company. The shares were sold via an institutional bookbuild.
CSR fell 5.26 per cent as its shares traded without the right to the latest dividend.
Other markets
Asian markets were little changed. The Asia Dow edged up 0.1 per cent. China’s Shanghai Composite was steady. Hong Kong’s Hang Seng dipped 0.03 per cent. Japan’s Nikkei lost 0.18 per cent.
Gold trimmed last night’s 2.1 per cent surge. The yellow metal eased US$2.60 or 0.15 per cent to US$1,713.40 an ounce.
Brent crude bounced 23 US cents or 0.24 per cent to US$95.59 a barrel.
The dollar slipped back below 65 US cents, lately down 0.18 per cent at 64.97 US cents.
