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The share market scaled fresh heights as the prospect of extended stimulus spending and record-low interest rates for longer offset growth worries.

A fourth day of gains lifted the S&P/ASX 200 briefly as high as 7417.6, eclipsing last month’s previous record by more than ten points. At mid-session, the index was ahead two points or 0.03 per cent at 7397.

Gains in bulk metal miners, Wesfarmers and Macquarie Bank outweighed declines in high-street banks, energy companies and bond proxies.  

What’s driving the market

The ASX followed Wall Street into record territory as grim Covid-19 case numbers in NSW proved no obstacle. The S&P 500 climbed 1.01 per cent on Friday to a new high. The Dow rose 0.68 per cent, closing above 35,000 for the first time.

David Bassanese, Chief Economist at BetaShares, said investors were looking beyond current lockdowns to the economic rebound expected to follow next quarter.

“Q3 GDP is now shaping up to be downright ugly, yet markets have learnt to look through the weakness and focus on the likely Q4 re-opening. Such sentiment will be supported by the fact that the RBA now seems even less likely to taper its bond purchases in September.

“The good news is that states other than NSW could emerge from lockdowns within days if not a week or so,” he added. “In NSW, where the virus has had more time to spread, the outlook remains bleak – zero community delta transmission and a ‘soft lockdown’ appear incompatible goals, and until either one is forsaken Sydney’s lockdown risks dragging on indefinitely.”

New South Wales reported 145 new local cases in the 24 hours to 8 pm last night, continuing a run of triple-digit tallies. South Australia will exit lockdown at midnight tomorrow night after recording just one new case. Victoria reported 11 new cases, Queensland one case.  

A global growth scare early last week quickly gave way to renewed buying interest on the ASX amid speculation the Reserve Bank will extend its bond buying program to support a flagging economy. A lockdown-induced contraction in growth would also push out any increase in interest rates.

The market ignored signs lockdowns were starting to affect the profit outlook in pockets of the market. Commercial property giant GPT withdrew its full-year guidance, citing the impact of lockdowns in Sydney and Melbourne. Shares in the diversified property owner dropped 2.32 per cent to an eight-week low.

“We have seen a strong recovery across our retail portfolio during the course of the first six months of this year,” CEO Bob Johnston said. “However, given the recent restrictions in both Sydney and Melbourne and the uncertainty as to when these restrictions will be lifted and the ongoing risk of additional measures, we believe it is prudent to withdraw… guidance for the full year.”

Going up

BHP showed no ill effects from iron ore’s worst week since the start of the pandemic. The Big Australian edged up 1.6 per cent to a record after the ore price held above US$200 a tonne on Friday. Rio Tinto climbed 2.54 per cent, Fortescue Metals 0.87 per cent and Champion Iron 3.25 per cent.   

Other heavyweight gains included Wesfarmers +0.66 per cent, Macquarie Group +0.89 per cent and Aristocrat Leisure +0.13 per cent.  

A record quarter lifted rare earths miner Lynas 8.86 per cent to an eight-year high. Sales revenue increased to $185.9 million from $110 million the previous quarter. Receipts jumped to $192 million from $133 million.

Women’s clothing retailer City Chic Collective climbed 5.73 per cent to a record on news it will acquire European plus-size e-tailer Navabi for $9.6 million in cash. CEO and MD Phil Ryan said the acquisition gave the company a foothold in the European plus-size market. The retailer also reported a 32.9 per cent increase in full-year sales revenue.  

Best & Less began life as a listed entity with a rise of 4.17 per cent. Shares issued at $2.16 this morning climbed to $2.25.

Going down

AMP declined 0.69 per cent after announcing it would surrender ownership of clients to financial advisers. The change would allow advisers to take their clients with them if they severed their relationship with the wealth manager. The company said the new model prioritised clients and gave advisers increased flexibility.

The big four banks retreated with bond yields. The yield on ten-year Australian government bonds eased more than a basis point back under 1.2 per cent. CBA fell 0.14 per cent, ANZ 0.4 per cent, NAB 0.61 per cent and Westpac 0.57 per cent.

Gold stocks dragged following the yellow metal’s first weekly loss in five weeks. Silver Lake Resources shed 6.5 per cent, St Barbara 2.85 per cent and Newcrest 1.28 per cent.

Crown Resorts dropped 3.99 per cent after the WA Government sought more time to complete a Royal Commission into the Perth casino. The projected timeline has been extended from mid-November to March next year so the Commissioners can assess the findings of the Victorian Royal Commission.

Boral dipped 0.13 per cent after announcing it will sell its Australian timber business to Allied Natural Wood Enterprises for $64.5 million. The sale price was “broadly in line” with its carrying value.

Other markets

Australian gains were kept in check by a decline in US futures. S&P 500 futures dropped 13 points or 0.3 per cent.

Chinese and Hong Kong equities logged solid declines. The Shanghai Composite dropped 1.41 per cent. Hong Kong’s Hang Seng shed 2.19 per cent. The Asia Dow eased 0.02 per cent. Japan’s Nikkei rallied 1.34 per cent.

Oil started the week on the back foot as part of a broader retreat from risk. Brent crude declined 20 US cents or 0.27 per cent to US$73.90 a barrel.

Gold climbed US$4.50 or 0.25 per cent to US$1,806.30 an ounce.

The dollar eased 0.16 per cent to 73.55 US cents.

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