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The share market trimmed strong early gains as record Covid cases in Beijing triggered profit-taking after the market briefly climbed 50 points in the wake of Saturday’s federal election.

At the halfway mark, the S&P/ASX 200 was down three points or 0.04 per cent. The Australian benchmark jumped 50.4 points in early action following Labor’s victory.

Gains in mining and energy stocks helped offset a bank sell-off and pressure on traditional defensive sectors. Elders and Codan jumped on positive earnings updates.

What’s driving the market

A promising start to the trading week soured on mid-morning reports Covid cases jumped in China’s capital over the weekend. The city reported 94 new cases, sharpening the risk of a Shanghai-style lockdown. Residents in several suburbs were asked to work from home until May 28.

Hong Kong’s Hang Seng per cent slumped 1.53 per cent. China’s Shanghai Composite gave up 0.5 per cent.

The ASX’s early advance came as US equity futures surged and investors appeared to take the election result in their stride. The market rallied into polling day as a change of government appeared increasingly likely. The ASX 200 briefly built on those gains despite questions over the make-up of the new parliament.

CommSec said this morning’s performance continues a long-term trend towards post-election share market gains.

“In the 11 elections held since 1990, the All Ordinaries Index climbed by an average of 1.2 per cent in the 15 trading days after poll date. In fact, the All Ordinaries Index has risen in the 15 trading days following every one of the eight federal elections held since 1998,” CommSec chief economist Craig James wrote.

The immediate challenges for the new government will be tackling labour shortages, housing pressures, demand for climate action and the growing cost of living.

“With the job market continuing to tighten, a priority of the new government will need to be on measures to expand labour supply and broader economic capacity issues,” James said. “The electorate will also be keen to see what measures the new government will employ to address ‘cost of living’ issues. Petrol prices are set to soar further in coming weeks as regional supplies have tightened considerably.”

A strong advance in US equity futures helped the market look past Friday’s mixed finish. S&P 500 futures were lately up 29 points or 0.73 per cent after earlier rising more than 1 per cent.

Wall Street’s main indices finished little changed on Friday after taking investors on another wild ride. The S&P 500 finished 0.01 per cent ahead after briefly falling as much as 2.3 per cent into bear market territory.  

Going up

Positive developments in China at the end of last week kept mining and energy stocks on the rise. The People’s Bank cut a key lending rate. Shanghai started to lift Covid restrictions and over the weekend resumed some public transport.

Fortescue Metals climbed 3.45 per cent. BHP firmed 1.82 per cent, Santos 1.42 per cent, Rio Tinto 2.32 per cent and Woodside 1.11 per cent.

Communications and metal detection business Codan was the morning’s best performer, rising 13.19 per cent after forecasting a record full-year profit. The board said it now expects the second half to match a record $50 million first-half profit.

The Elders share price hit a decade high as the agribusiness continued to reap the benefits of favourable cropping conditions. A strong first half encouraged the company to raise its full-year underlying earnings forecast to growth of 30-40 per cent.

First-half earnings bounced 80 per cent amid growing demand for fertilisers and crop protection. The share price soared 11.39 per cent to a level last seen in 2009.

Imugene rallied 12.5 per cent after the board reassured shareholders the biotech was financially secure and its development pipeline remained strong. Investors have endured a challenging year as the share price fell from above 60 cents to as little as 15 cents this month.

“Imugene is as strong as it has ever been in its history,” Executive Chair Paul Hopper and CEO Leslie Chong said in a joint letter to shareholders.   

The Star Entertainment Group firmed 0.64 per cent following the resignation of John O’Neill as Executive Chair. Ben Heap will act as interim Chair. Geoff Hogg will act as CEO following the resignation of Matt Bekier in March as the company battled accusations it failed to meet regulatory obligations.

Going down

Incitec Pivot faded 4.68 per cent after reporting a record first half and announcing plans to split its fertiliser and explosives businesses into separate listed companies. First-half profit jumped to $384 million from $36 million in 1H21. The result was overshadowed by a proposal to restructure into Dyno Nobel (containing the explosives business) and Incitec Pivot Fertilisers.

“The synergy of sharing an ammonia manufacturing core has become less meaningful,” Managing Director and CEO Jeanne Johns said.

The defensive utilities sector has been one of this year’s best performers as investors sought havens from wider market volatility. The sector dropped 0.6 per cent this morning as traders booked profits in APA Group -1.08 per cent and AGL -0.35 per cent.

The financial sector lost ground steadily after a positive start. NAB drifted 0.93 per cent, ANZ 0.9 per cent, Westpac 0.59 per cent and CBA 0.63 per cent.

Other heavyweight drags included CSL -1.52 per cent, Woolworths -1.43 per cent and Goodman Group -1.06 per cent.

Other markets

Oil added to Friday’s gains. Brent crude climbed 64 US cents or 0.6 per cent to US$113.19 a barrel.

Gold rallied US$9.30 or 0.5 per cent to US$1,851.40 an ounce.

The dollar firmed 0.37 per cent to 70.87 US cents.

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