Records for mining giants BHP and Rio Tinto helped lift the ASX to a new peak following a rebound in bulk metals and a fifth night of gains on Wall Street.
The S&P/ASX 200 hit an all-time high at 7433.5 before trimming its advance to 37 points or 0.5 per cent.
Resource stocks set the pace following overnight gains in iron ore, copper and US energy companies. Technology and defensive stocks declined.
What’s driving the market
US investors quickly discounted yesterday’s sharp declines on Asian markets, triggered by increasingly aggressive market intervention by Chinese authorities. The S&P 500 and Dow edged up 0.24 per cent to new highs as optimism over the domestic earnings season outweighed selling in US-listed Chinese shares.
“After an initial hint of contagion, European and US equities looked past Asian concerns over China’s regulatory crackdown, closing the day with modest gains at or near record highs,” NAB Currency Strategist Rodrigo Catril said. However, he warned, “China’s regulatory uncertainty is not going away, indeed it looks to be broadening with no clarity as to when and where it will end.”
Chinese markets added to yesterday’s falls. The Shanghai Composite, which fell 2.34 per cent yesterday after Chinese authorities cracked down on private education companies, dropped another 0.58 per cent today. The Hang Seng compounded yesterday’s 4.13 per cent decline with a drop of 1.46 per cent as property companies attracted regulatory attention.
The Asia Dow gained 0.37 per cent. Japan’s Nikkei added 0.51 per cent.
A record 172 new local Covid-19 cases in a single day for New South Wales was partly offset by news both Victoria and South Australia will emerge from lockdown tonight.
ANZ data indicated spending in Sydney slumped last week to its lowest level since the start of the pandemic.
Consumer confidence deteriorated to a 2021 low. The ANZ Roy Morgan weekly index declined 3.5 per cent from 104.3 to 100.7, a level last seen in November last year. Despite the decline, the index remained well above pandemic lows.
The materials sector has provided the muscle behind the market’s record highs over the last week, climbing 2.2 per cent this session to a new peak. Rio Tinto joined BHP at record levels, rising 2.48 per cent. BHP put on 3.26 per cent. Fortescue Metals added 2.75 per cent.
“A weaker [US dollar] amid record-low US real yields has stoked some exuberance within the base metals complex. [London Metal Exhange] copper broke above its 50-day moving average and settled more than 3% higher on the day, which may have triggered further systematic buying interest,” ING commodities strategists Wenyu Yao and Warren Patterson wrote.
“The Delta variant and rising Covid-19 cases have failed to show strong evidence of demand destruction,” they added.
Strength in copper prices and robust South Australian production helped lift OZ Minerals 7.99 per cent. Copper output increased 22 per cent last quarter despite the impact of Covid-19 on the miner’s Brazilian operations. The company reaffirmed its full-year copper production guidance, lifted gold guidance and reduced its cost outlook.
Energy was the morning’s other standout sector despite a mixed performance on energy markets overnight. Woodside Petroleum climbed 1.56 per cent. Santos tacked on 0.93 per cent.
Oil Search eased 0.25 per cent after reporting a drop in production last quarter. Strong prices helped the company increase second-quarter operating revenue by 21.5 per cent despite a 4.1 per cent dip in output due to planned maintenance. The company reaffirmed its full-year guidance.
Bluescope rallied 5.23 per cent to an all-time high after beating second-half guidance. The steelmaker said it expected a record second-half contribution of $1.19 billion, above previous guidance of $1 – $1.08 billion. The strong half lifted full-year underlying earnings to $1.72 billion.
Temple & Webster tested six-month highs after reporting a record full-year result and a strong start to the new financial year. The online furniture retailer increased full-year revenue by 85 per cent to $326.3 million. Revenues during the first three weeks of this month improved 39 per cent from the same period last year. The share price jumped 10.42 per cent.
“While lockdowns during FY20 and FY21 have accelerated the underlying shift from offline to online, pleasingly we continue to see strong growth even when comparing against Covid impacted numbers,” CEO Mark Coulter said.
Japara Healthcare flew up 18.45 per cent to $1.38 after the board backed a deal for Calvary Health Care to acquire the company at $1.40 a share. The aged care provider had been the object of a bidding war between Calvary and Bolton Clarke. The board unanimously recommended the improved Calvary offer in the absence of a superior bid.
Rising bond yields dulled interest in traditional alternative investments. Healthcare, consumer staples and utilities all declined after the yield on ten-year Australian government bonds climbed almost two basis points back above 1.2 per cent.
Cochlear fell 1.94 per cent, Fisher & Paykel Healthcare 1.66 per cent and AGL Energy 1.52 per cent. At the heavyweight end, Woolworths shed 0.48 per cent, CSL 0.91 per cent, Wesfarmers 0.29 per cent and Coles 0.17 per cent.
Tech – another yield-sensitive sector – declined 0.85 per cent. Nanosonics gave up 3.15 per cent, Nuix 2.43 per cent and Afterpay 1.59 per cent.
Kina Securities slid 8.37 per cent after regulators in Papua New Guinea opposed the lender’s proposed acquisition of Westpac‘s Pacific businesses. The PNG Independent Consumer and Competition Commission issued a draft determination indicating it proposes to deny the sale. Westpac and Kina intend to make further submissions ahead of a final determination in September.
NAB was the worst of the banks during a mixed morning, falling 0.08 per cent. CBA gained 0.98 per cent, ANZ 0.58 per cent and Westpac 0.28 per cent.
US futures stumbled as Chinese stocks resumed yesterday’s sell-off. S&P 500 futures eased seven points or 0.17 per cent.
Oil cemented an overnight advance. Brent crude rallied 29 US cents or 0.42 per cent to US$74.01 a barrel. Gold declined $3.20 or 0.18 per cent to US$1,796 an ounce.
The dollar faded 0.15 per cent to 73.73 US cents.