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The share market pushed towards a fourth straight monthly advance with a tentative rebound at the end of a volatile week on financial markets.
The S&P/ASX 200 rallied 33 points or 0.5 per cent by mid-session, reclaiming around a quarter of yesterday’s losses. The index dived 131 points yesterday amid panic on Wall Street as hedge funds were outmanoeuvred by a chatroom army of retail traders.
Today’s recovery put the index on track for a monthly tally of around 100 points or 1.5 per cent.
What’s driving the market
A relief rally swept Wall Street after several trading platforms slapped trading restrictions on retail favourites GameStop and AMC Entertainment. The buying bans triggered a collapse in the prices of speculative stocks, easing pressure on funds that had bet on prices going lower.
“The broader equity market took that as a positive sign after a number of hedge funds were facing eye-watering losses due to the extreme short squeeze. Positive US data also added to the recovery in sentiment with Jobless Claims less than expected,” NAB Senior Economist David de Garis said.
The S&P 500 rebounded 0.98 per cent. The benchmark plunged 2.57 per cent on Wednesday night amid reports of margin calls and forced selling.
“The trade war between retail investors and hedge funds seems to have taken a wild turn after popular trading platforms like Robinhood restricted trading in the heavily shorted stocks that soared this week,” Kalkine Group CEO Kunal Sawhney said. “On the face of it, the trading platforms’ move appears to rule in favour of hedge funds. However, it seems relevant to prevent fierce bets in the share market without any fundamental foundation. Moreover, the restriction appears necessary to retain the conventional wisdom in the share market that investing is not gambling and requires prudent investing principles.”
The local market faced a loss for the week but another winning month thanks to this morning’s gains and a partial recovery yesterday. The industrial and healthcare sectors led today’s rebound. Financial and energy stocks declined.
The market pared its rise as US futures wobbled. S&P 500 futures sank nine points or 0.25 per cent.
The domestic quarterly reporting season wound up with a flood of reports on the last trading day of the month. Next week will bring the start of the half-yearly reporting season.
Going up
Industrial giants Aristocrat Leisure and Transurban were among the best of the heavyweights, rising 2.8 and 2.3 per cent, respectively. Brambles gained 1.7 per cent.
Steelmaker Bluescope jumped 6.2 per cent after exceeding half-year profit guidance. The company now expects pre-tax earnings of around $530 million, versus previous guidance of $475 million.
In the tech sector, Megaport surged 6.1 per cent and Nearmap 4.4 per cent. Afterpay inched up 0.4 per cent.
Beyond tech and industrials, the big movers at the top end were CSL +2.7 per cent, Telstra +1.3 per cent and Coles +1.2 per cent.
Networks specialist Service Stream jumped 8.5 per cent on news of a design and construction deal with Telstra. The deal will last at least three years, with possible extensions of up to two years.
ResMed rose 0.8 per cent after reporting a 9 per cent increase in revenue last quarter to $800 million. Net operating profit improved 12 per cent.
Real estate ad group Domain Holdings rallied 8.8 per cent to an all-time high, boosted by unexpected resilience in property markets during the pandemic.
Record quarterly sales revenue of $119.4 million helped lift rare earths miner Lynas 1.5 per cent. Oz Minerals rose 2.3 per cent after reaffirming its gold and copper production guidance.
Domino’s Pizza put on 1.8 per cent after announcing it will hand back $792,000 in JobKeeper payments.
Going down
A heavy fall in iron ore pressured the big three producers. The spot price for ore landed in China tumbled 5.6 per cent yesterday. Fortescue Metals dropped 1.7 per cent, Rio Tinto 1.4 per cent and BHP 0.5 per cent.
NAB eased 0.8 per cent after snapping up neobank 86 400 in a deal that will require regulatory approval. CBA fell 1.1 per cent, Westpac 0.9 per cent and ANZ 1.2 per cent.
Energy stocks declined amid demand worries as China imposed travel restrictions to contain Covid outbreaks. Woodside Petroleum slid 0.8 per cent, Beach Energy 1.3 per cent and Santos 0.7 per cent.
A record half-year result failed to stem a third day of selling in online retailer Kogan. The share price slumped 5.4 per cent to a four-week low.
Other markets
Asian markets recovered from yesterday’s setbacks. China’s Shanghai Composite rallied 0.52 per cent, Hong Kong’s Hang Seng 1.21 per cent and Japan’s Nikkei 0.26 per cent.
Gold rebounded from six days of selling, rising $3.30 or 0.2 per cent to $US1,841.20 an ounce. Brent crude bounced 16 cents or 0.3 per cent to $US55.26 a barrel.
The dollar was steady at 76.7 US cents.
What’s hot today and what’s not
Hot today: The Reddit/GameStop speculative phenomenon reached fresh heights of absurdity this morning. Shares in junior Australian miner GME Resources (ASX:GME) were placed in a trading halt pending an answer to a price query from the ASX. The exchange operator seemed to be the only market participant unaware that GME’s stock has risen because the company shares the same stock code as GameStop, the US retail chain at the centre of this week’s short squeeze trading controversy. Shares in GME – the local one – were up 52.9 per cent before the ASX put a stop to the fun. Pity the poor GME rep who has to answer the price query.
Not today: An old market adage says companies are quick to report good news, but slow to deliver the bad. Notable splats on the last day of the quarterly reporting season included Zelira Therapeutics (ASX:ZLD) and Consolidated Zinc (ASX:CZL). Zelira shares tanked 18.9 per cent after the medicinal cannabis company reported a collapse in customer receipts from $85,000 in the first three months of the financial year to $3,000 last quarter. CZL sank 21.5 per cent after revealing it had just $716,000 in cash left at the end of a quarter impacted by operator and equipment availability issues.
