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Australian shares rose for only the second time in two weeks as rebounds in property landlords and banks offset pressure on commodity stocks.

The S&P/ASX 200 climbed 18 points or 0.28 per cent by mid-session.

Bond proxies such as REITs and consumer staples rallied as yields backed off an eight-year peak. The heavyweight financial sector rose to its highest in more than a week. Energy producers and miners sank following sharp falls in crude, iron ore and metals.

What’s driving the market

A better-than-expected night in the US gave bargain-hunters the confidence to add to positions near 19-month lows. The S&P 500 eased 0.13 per cent, but finished well off its weakest level in choppy trade.

The tone on Wall Street appeared set by bond markets, according to NAB’s head of FX strategy, Ray Attrill.

“The bond market vigilantes, who last year led the moves in currencies and equities, have taken recession concerns more to heart in the last 24 hours than the fear of central banks having to go still harder than discounted to get on top of inflation,” Attrill said.

“Thus 10-year Treasury yields are down 12bps to 3.16% and the 2-year note a bigger 14bps to 3.06%. This follows similar sized falls in Europe.”

Australian government bond yields duly backed down. The yield on ten-year bonds dropped more than 16 basis points this morning to the lowest in more than a week. The decline in yields provided a tailwind to equities that compete with bonds for institutional fund flows.

Most striking about this morning’s rally was that it was achieved in the face of pressure on the heavily-weighted commodity sectors.

“Recessionary fears rattled commodity markets, with metals and oil falling sharply. Conversely, precious metals found support on strong haven demand,” ANZ senior commodity strategist Daniel Hynes said.

Data this morning confirmed recent interest rate rises have yet to seriously undermine the health of the economy. S&P Global’s preliminary composite gauge of Australian private-sector activity eased to 52.6 from 52.9. While this month’s reading was the lowest in five months, it was still comfortably above the 50-point level that separates contraction from expansion.  

The manufacturing PMI edged up to 55.8 from 55.7 last month. The services-sector PMI dipped to 52.6 from 53.2.

“Private sector output and new orders continued to expand at solid rates, leading to a continued expansion in Australia’s private sector workforce… Meanwhile, supply constraints persisted, contributing to a further accumulation of backlogged work,” S&P Global said.

“Turning to prices, inflationary pressures remained severe and among the highest on record. Overall business confidence remained positive, but eased to the lowest in over two years.”

Going up

Property was back in vogue following a horror six months that saw the real estate investment trust sector lose more than a quarter of its value.

A guidance upgrade from Growthpoint Properties gave the sector a shot in the arm. The industrial and office investment trust raised its guidance for funds from operations to at least 27.7 cents per share. The share price responded by rising 3.69 per cent.

BWP Trust climbed 3.72 per cent. Centuria REIT added 3.51 per cent, Arena REIT 3.45 per cent and Goodman Group 3.39 per cent.

The big four banks added bulk to the upswing. CBA firmed 0.89 per cent, ANZ 1.47 per cent, NAB 1.19 per cent and Westpac 1.02 per cent.

Wesfarmers gained 2.51 per cent. Supermarkets Woolworths and Coles jumped 1.92 and 2.03 per cent, respectively.

Bubs Australia firmed 2.02 per cent on news two more planeloads of infant formula will leave for the States shortly. One plane containing 90,270 tins of Bubs formula will arrive in Los Angeles on Sunday. Another containing 90,195 tins will reach Philadelphia on July 5.

Shareholders in APA Group will receive a final distribution of 28 cents per security. The share price rose 2.55 per cent.

Going down

The bulk metal majors tested multi-week lows as iron ore fell for a tenth session. The most-traded futures contract on the Dalian Commodity Exchange was lately down 2.1 per cent.

Fortescue Metals shed 4.31 per cent, Rio Tinto 2.69 per cent and BHP 2.8 per cent. Champion Iron gave up 7.3 per cent.

OZ Minerals sank 4.84 per cent after copper fell to a 15-month low in London trade. Chalice Mining lost 6.18 per cent. South32 gave up 2.2 per cent.

A one-month low in Brent crude helped pull Woodside down 2.53 per cent, Santos 2.2 per cent and Beach Energy 2.85 per cent.

AGL eased 1.28 per cent after telling shareholders it is still months from completing a strategic overhaul following an investor revolt against a proposed demerger. The energy giant said it would present initial outcomes of a review in September.

Bravura Solutions dipped 2.08 per cent on news CEO Nick Parsons will stand down in August. Libby Roy, currently Managing Director of Optus Business, will take over.

A tough week for leading gold miners continued with a production downgrade from Ramelius Resources. The share price sank 10.55 per cent to a two-year low after persistent rain and labour shortages prompted a warning full-year production would fall “marginally short” of guidance.

Meanwhile, St Barbara slumped another 15.68 per cent after yesterday deferring a decision on a mine expansion. Sandfire shed 5.02 per cent, Regis Resources 7.1 per cent and Silver Lake Resources 4.58 per cent.

Other markets

Asian markets were mixed but little changed. The Asia Dow declined 0.27 per cent. China’s Shanghai Composite dipped 0.07 per cent. Japan’s Nikkei eased 0.11 per cent. Hong Kong’s Hang Seng bucked the trend with a rise of 0.2 per cent.

US futures waxed and waned this morning. S&P 500 futures were recently down 15 points or 0.4 per cent.

Oil continued to lose altitude. Brent crude slid US$3.50 or 3.2 per cent to US$105.15 a barrel.

Gold retreated US$4.20 or 0.23 per cent to US$1,834.20 an ounce.

The dollar slipped back under 69 US cents, lately down 0.2 per cent at 68.92 US cents.

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