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The All Ordinaries inched to an all-time high after jobs data showed Australians worked as many hours last month as before the pandemic.
The index hit a high of 7293.1, surpassing last February’s intraday record by 3.4 points. Mid-session, the index was ahead ten points or 0.14 per cent at 7290.5.
The S&P/ASX 200 trailled with a rise of six points or 0.08 per cent. The narrower of the two benchmarks remained more than 150 points short of its all-time high.
Woodside and the big three iron ore producers led the advance. Newcrest, CSL and Telstra kept a lid on the rally.
What’s driving the market
The market reversed early losses after the March employment report underlined the strength of the post-pandemic recovery. The official unemployment rate dropped two basis points to 5.6 per cent as the economy added twice as many jobs as expected. Employment increased by 70,700 people as the participation rate increased and underemployment declined. The number of hours worked increased 1.2 per cent to its highest since the start of the pandemic.
“The proportion of women employed was the highest it’s ever been (58.5 per cent), half a percentage point higher than in March 2020, while the proportion of men employed remained slightly lower than before the pandemic (66.8 per cent, compared with 67.0 per cent in March 2020),” Bjorn Davis, head of labour statistics at the Australian Bureau of Statistics, said.
Market enthusiasm was tempered by the prospect of several challenging months as lay-offs due to the end of JobKeeper filter through.
“Still a big test coming up in the next few data releases as JobKeeper ends but going into that with a lot more momentum than expected,” IFM chief economist Alex Joiner tweeted.
Stocks on the other side of the Pacific retreated overnight as investors weighed the inflationary implications of an improving economy. The S&P 500 sank 0.41 per cent and the Nasdaq Composite shed 0.99 per cent after positive economic signals from the Federal Reserve’s Beige Book triggered a sell-off in bonds and a rise in yields (yields move inversely to prices).
“US yields nudged slightly higher overnight after the Beige Book gave rise to the tug of war between inflation and growth,” Axi Chief Global Market Strategist Stephen Innes said. “The report suggested that businesses were raising bottom line prices between February and April, which signalled that firms feel comfortable passing the higher input cost on to consumers amid a rapidly improving US labour market.
“With US yields basing and rising ever so slightly, extremely rates finicky long-duration Tech assets sold off. This pattern has become a typical ‘two steps forward and one step back routine’ for tech shares as US rates ebb and then start to flow higher again.”
Going up
Rises in oil and metal prices lifted ore miners and oil companies. BHP rallied 2.33 per cent, Fortescue Metal 2.17 per cent and Rio Tinto 2.14 per cent. Champion Iron added 5.87 per cent.
Ampol climbed 5.74 per cent after raising first-quarter pre-tax earnings to $150 million from $122 million the previous quarter. Increased margins helped offset lower volumes. Woodside put on 0.87 per cent, Santos 1.5 per cent and Beach Energy 4.03 per cent.
An upbeat trading update helped Qantas inch up 0.58 per cent. The airline said all domestic crew had returned to work, and strong leisure demand meant the airline was operating at 90 per cent of pre-Covid levels. Despite recent vaccine setbacks, the company said it continued to prepared for the resumption of international travel in late October.
Jeweller Michael Hill climbed 5.1 per cent to a two-and-a-half year high after increasing sales by 16.4 per cent last quarter.
Going down
Gold miners sold off as rising bond yields dulled demand for alternative stores of wealth. Newcrest fell 1.73 per cent, Resolute Mining 6.02 per cent and Evolution 5.77 per cent.
Regis Resources slumped to its lowest price since 2016 after issuing shares to fund its purchase of IGO’s Tropicana gold mine. The miner raised $494 million from institutions at $2.70 per new share. The share price traded as low as $2.61 before trimming its loss to 10.47 per cent at $2.73.
Companies with significant US earnings faced down-pressure from a drop in the greenback. CSL eased 0.77 per cent, Transurban 0.43 per cent, ResMed 1.09 per cent and Cochlear 0.44 per cent.
A production downgrade sent coal miner Whitehaven down 13.82 per cent. Geological challenges at the Narrabri underground mine prompted the firm to cut its coal sales projection to 17.8-18.3 million tonnes from previous guidance of 18.5-19 million. Unit costs also increased.
The financial sector pulled back from yesterday’s 13-month closing high. CBA gave up 0.31 per cent, ANZ 0.43 per cent, NAB 0.41 per cent and Westpac 0.24 per cent.
Bank of Queensland dropped 0.9 per cent despite reporting a 66 per cent first-half profit rebound to $154 million. CEO and Managing Director Georg Frazis said the bank’s retail business had “delivered a strong turnaround”. The bank raised its interim dividend to 17 cents per share from 11 cents in 1H20.
Other markets
The mood on Asian markets deteriorated late morning. The Asia Dow dipped 0.04 per cent. China’s Shanghai Composite dropped 1.09 per cent and Hong Kong’s Hang Seng lost 0.81 per cent. Japan’s Nikkei slashed its advance to 0.12 per cent.
S&P 500 futures improved four points or 0.1 per cent.
Brent crude eased three cents or 0.05 per cent to US$66.55 a barrel. Gold was little changed, down 20 cents or less than 0.1 per cent to US$1,736.10 an ounce.
The dollar eased 0.04 per cent to 77.21 US cents.
