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The share market moved temporarily into positive territory for 2020, hitting a nine-month high as resource stocks spearheaded gains.

At mid-session the S&P/ASX 200 was ahead 32 points or 0.5 per cent. Earlier, the index touched its strongest level since the first week of the February-March pandemic plunge.

What’s driving the market

Multi-year highs in iron ore and copper helped the market fly past its 2020 starting point of 6684 in the first ten minutes of trade. The index touched 6714.7 before paring back its advance to 6667. BHP traded at a level last seen in April 2011. Fortescue Metals climbed to a new all-time high. Rio Tinto moved closer to its pre-GFC peak.  

The market pared its gains as US index futures struggled for traction following record closes on Friday. S&P 500 futures eased three points or less than 0.1 per cent. On Friday, the index rallied 0.88 per cent as investors bet on positive vaccine and stimulus news before Christmas.

“The positives of vaccine roll out – we might hear from the FDA on approval of Pfizer-BioNTech’s vaccine this week – and stimulus hopes – where over the weekend reports are that Senate leader Mitch McConnell may now be on side with the US$908 billion bipartisan-crafted bill – meant that the S&P 500, NASDAQ and Russell 200 indices all went out at record highs Friday,” NAB Head of FX Strategy Ray Attrill said.

Over the weekend, Bloomberg reported Republicans working on a bipartisan $US908 billion relief package expect the White House and Senate Majority Leader Mitch McConnell to back the deal.  

“President Trump has indicated that he would sign a US$908 billion package – there’s only one $908 billion package out there and it’s ours,” Senator Bill Cassidy, a Republican from Louisiana, told Fox News. “The pain of the American people is driving this and I’m optimistic that both of those leaders will come on board.”

Back home, activity in the services sector expanded at its fastest rate of the year. The Australian Industry Group’s services index climbed to 52.9, its second month of expansion and best result since last December. Job advertising expanded for a seventh straight month since plunging more than 50 per cent in May, rising 13.9 per cent in December.

Going up

The big three industrial miners led the charge following fresh seven-year highs in iron ore and copper. Fortescue Metals put on 3.7 per cent, BHP 1.7 per cent and Rio Tinto 1.9 per cent. Mining services provider Perenti Global gained 2.9 per cent. Base metals miner Western Areas added 4.3 per cent.

A nine-month peak in oil lifted the energy sector towards a third consecutive advance. Woodside Petroleum gained 0.2 per cent and Cooper Energy 2 per cent. Santos jumped 2.8 per cent after signing a supply deal for natural gas from the Barossa with a subsidiary of Japanese multinational Mitsubishi.

A Covid-fuelled move to “shop local” helped boost IGA supplier Metcash‘s half-year underlying post-tax profit by 43 per cent to $129.6 million. The distributor’s shares surged 9.3 per cent to their highest level since May 2018.

Tabcorp rose 0.1 per cent after announcing it will appeal an amended tax assessment that exposes the gaming group to $62 million in outstanding taxes and $9 million in penalty interest.

Outside the mining space, the best of the heavyweight movers were IAG +1.7 per cent, Woolworths +1.5 per cent and Brambles +1.2 per cent. CSL edged up 0.5 per cent.

Xero topped a solid morning for tech stocks, gaining 4 per cent. Nanosonics added 2.7 per cent, Afterpay 1.7 per cent and Megaport 1.5 per cent.

Going down

The financial sector succumbed to a slow rot. Macquarie Group shed 1.4 per cent, ANZ 0.6 per cent and NAB 0.1 per cent. CBA traded unchanged.

Westpac rolled over to a loss of 0.4 per cent after announcing it was exiting its Pacific businesses to concentrate on its Australian and New Zealand operations. Kina Securities will buy Westpac Fiji and Westpac’s 89.9 per cent stake in Westpac Bank PNG for $375 million, plus up to $45 million in earn-out payments.

Consumer discretionary was the only sector beside financials to trade lower. Wesfarmers dropped 0.4 per cent. IDP Education gave up 4 per cent and JB Hi-Fi 2 per cent.

Collins Foods dropped 1.5 per cent as it traded without its dividend. Crown Resorts faded 0.4 per cent despite news the Victorian government relaxed restrictions at the company’s Melbourne casino.   

Other markets

China’s Shanghai Composite and Hong Kong’s Hang Seng nudged up 0.1 per cent. Japan’s Nikkei fell 0.2 per cent.

Oil retreated from Friday’s nine-month closing high. Brent crude eased 14 cents or 0.3 per cent to $US49.11 a barrel. Gold advanced 80 cents or 0.1 per cent to $US1,840.80 an ounce.

The dollar slipped 0.02 per cent to 74.27 US cents.

What’s hot today and what’s not

Hot today: A glorious run for pot stocks continued after the US House of Representatives passed a bill to decriminalise cannabis. The Marijuana Opportunity Reinvestment and Expungement  (MORE) Act will remove cannabis from the list of controlled substances, if passed into law. Creso Pharma (ASX:CPH) soared 27.5 per cent. AusCann (ASX:AC8) gained 25.8 per cent. Roto-Gro (ASX:RGI) added 17.1 per cent and Cann Group (ASX:CAN) 12.9 per cent.

Not today: Disappointing drilling results from the Fraser Range in WA cost S2R Resources (ASX:S2R) almost a third of its market valuation. The share price plunged 30 per cent after diamond drilling at a promising electromagnetic conductor dampened hopes for the prospect. “Visual inspection and handheld XRF readings did not record significant nickel or copper sulphides,” the company reported. A second target has been identified for drilling.

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