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A profit rebound and share buyback at Commonwealth Bank and a rally in the mining giants helped push the ASX 200 above 7600 for the first time.

The benchmark hit a record 7615 before paring its gain to 31 points or 0.4 per cent mid-session at 7593.

CBA set a new high after increasing its full-year profit by almost 20 per cent, raising its dividend and announcing a $6 billion share buyback. BHP and Rio Tinto shrugged off a sharp decline in iron ore.

What’s driving the market

Rebounds in crude oil and metals, plus broadly positive leads from the US helped lift the market to a sixth straight high. Miners, oil companies and banks led the advance.  

“Investors appear to be largely upbeat as the corporate earnings season gathers pace,” Kalkine Group CEO Kunal Sawhney said. “Early results from the reporting season indicate that companies are in the middle of a cashflow supercycle as they announce significant dividends for shareholders. 

“The latest entity to grab attention for a cash splash to shareholders is Commonwealth Bank, which has impressed with its dividend hike as profits jump by a fifth from previous year’s pandemic-affected levels. Recent earnings results from Megaport, Challenger, and James Hardie have also surprised markets on the upside.” 

Investors applauded a strong result from the ASX’s largest company by market capitalisation. CBA shares traded as high as $109.03 before shaving their advance to 1.25 per cent at $107.89.

The bank will launch a buyback to return excess capital after increasing cash net profit by 19.8 per cent to $8.653 billion. Shareholders will receive a final dividend of $2 per share. This year’s full-year payout of $3.50 is 17 per cent higher than last year.  

CEO Matt Comyn said low interest rates and the pandemic would remain headwinds, but the bank was well capitalised for the year ahead.

“Australia has a very strong, stable and secure financial system,” Mr Comyn said. “This includes well-capitalised and strong banks like the Commonwealth Bank, which together with the support of the federal and state governments, regulators and the broader industry, have helped the country through the worst pandemic in living memory.”

The broader verdict on this much-anticipated reporting season remains in the balance. Of the 19 ASX 200 companies to report earnings up to yesterday’s close, half saw share-price gains on the day of release, according to CommSec.

US stocks moved mostly higher overnight after the Senate passed the White House’s US$1 trillion infrastructure package. The Dow rose 0.46 per cent to a record. The S&P 500 edged up 0.1 per cent. The Nasdaq eased 0.49 per cent.

Westpac’s consumer sentiment survey continued this month’s run of lockdown-affected economic disappointments. The confidence index fell 4.7 points or 4.4 per cent to 104.1.

The Victorian government this morning announced an extension to the current state lockdown until at least August 19. New South Wales reported 344 new local cases, Victoria 20 cases and Queensland four cases.  

Going up

CBA’s result and a burgeoning recovery in lending rates kept the banks well-bid. ANZ climbed 1.35 per cent to a near two-month high. NAB rallied 1.19 per cent and Westpac 1.13 per cent.

The big three iron ore producers took in their stride a collapse in prices to their lowest since March. Spot ore landed at Tianjin fell 5.3 per cent yesterday to US$162.20 a tonne. Fortescue Metals put on 1.04 per cent, BHP 1.84 per cent and Rio Tinto 1.48 per cent.

Energy stocks rebounded with crude prices. Woodside Petroleum rose 0.78 per cent, Santos 1.27 per cent and Oil Search 1.29 per cent.

Supermarkets caught an updraft from the Victorian lockdown extension. Woolworths climbed 0.25 per cent to a record. Coles gained 1.05 per cent and IGA operator Metcash 0.12 per cent.

Mineral Resources gained 1.81 per cent after overcoming an early wobble following news costs at its Yilgarn iron ore mine are expected to rise by up to 10 per cent this financial year. The increase briefly overshadowed a strong full-year result from the ore/lithium miner. Revenues increased 76 per cent and underlying earnings by 148 per cent. The miner will pay a final dividend of $1.75 per share.

Signs of a pick-up in earnings helped Computershare overcome a soft start to the session after reporting an 18.8 per cent decline in full-year profit. The share registry said earnings increased by 39 per cent over the second half of the year. Earnings per share are expected to grow by 4 per cent this financial year as Covid’s impact abates. The share price firmed 1.29 per cent.

An improved bid from European private equity giant EQT boosted shares in Iress by 5.15 per cent. EQT raised its offer a second time to $15.91, including a 16 cent interim dividend. The board has granted its suitor 30 days to undertake due diligence.

Going down

IAG touched a six-month high before fading 2.65 per cent after reporting a full-year loss of $427 million, as flagged last month. Shares initially rallied on news the insurer expects to improve margins next year and see low single-digit growth in gross written premiums.  

Rising borrowing costs are a two-edged sword, lifting lenders while undermining valuations of growth companies that depend on borrowing to fund future growth. The tech sector wilted 0.75 per cent as Megaport fell 6.09 per cent, Xero 2.55 per cent, Nearmap 1.58 per cent and Afterpay 0.74 per cent.  

Other markets

The Asia Dow climbed 0.75 per cent, China’s Shanghai Composite 0.12 per cent, Hong Kong’s Hang Seng 0.76 per cent and Japan’s Nikkei 0.7 per cent.

US futures marked time ahead of tonight’s inflation update. S&P 500 futures were off two points or 0.04 per cent.

Oil added to an overnight rebound, its first advance in three sessions. Brent crude inched up three US cents or 0.04 per cent to US$70.66 a barrel.

Gold improved US$1 or 0.06 per cent to US$1,732.70 an ounce.

The dollar was steady near the middle of its recent trading range at 73.44 US cents.

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