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The share market mounted its strongest rally in seven weeks after worries about US rates and China’s property market abated overnight.
The S&P/ASX 200 surged 81 points or 1.1 per cent towards a third straight advance. Today’s rally was the biggest since a 99-point jump on August 2.
Energy and tech stocks led the push following a bounce in oil and a sharp decline in bond yields. Afterpay, Woodside Petroleum and Macquarie Group were amongst the leading heavyweights.
What’s driving the market
Wall Street recorded its strongest rise in two months after the Federal Reserve signalled it was not quite ready to reduce support for the economy. The central bank said it would act “soon” if the economy continued to perform, pushing out a decision until November.
Shares were already higher on signs troubled Chinese property developer Evergrande may avoid a disorderly collapse. The S&P 500 finished 0.95 per cent ahead. The Dow put on 1 per cent.
“Yesterday’s news that some (unspecified) arrangement has been agreed between Evergrande and owners of a domestic bond on which coupon payments were due today had been reached, helped foster a view Evergrande is not going to be allowed to collapse in a heap,” NAB Head of FX Strategy Ray Attrill said.
“Albeit the fate of the interest payments due on a US dollar bond today totalling about $83mn remains unknown. On the latter, Evergrande’s foreign bonds had been trading at around 30 cents in the dollar, so a lot is already discounted here… Large scale [People’s Bank of China] liquidity injections, adding around CNY100bn more than needed to meet maturities, also went some way toward allaying contagion fears from the property sector to broader Chinese markets.”
Evergrande shares briefly jumped more than 30 per cent this morning, before trimming their gain to 7.14 per cent. The rebound helped lift Hong Kong’s Hang Seng index 1.55 per cent. The Shanghai Composite in China firmed 0.56 per cent. The Asia Dow added 0.21 per cent. Japanese markets were closed for a holiday.
US equity futures also improved. S&P 500 futures climbed 11 points or 0.26 per cent.
Back home, business activity declined for a third month, but at a slower rate, according to a preliminary reading from Markit. The Flash Australia Composite Index edged up to a three-month high of 46 from 43.3 last month, below the 50-point level that divides expansion from contraction.
“The extension of COVID-19 restrictions into September continued to dampen business conditions in the Australian private sector,” Jingyi Pan, Economics Associate Director at IHS Markit, said.
Going up
An upbeat morning saw gains across most of the index’s major players. Afterpay led the charge with a rise of 4.56 per cent. Miner Fortescue Metals rallied 1.27 per cent and Rio Tinto 0.38 per cent. BHP faded 0.31 per cent.
The big four banks put on between 0.9 and 1.2 per cent. Macquarie Group gained 2.34 per cent, Telstra 1.01 per cent and Wesfarmers 0.54 per cent.
Woodside Petroleum climbed 1.54 per cent to a fresh five-week high. Santos gained 2.61 per cent, Oil Search 2.86 per cent and Beach Energy 3.32 per cent.
Insurers rebounded from yesterday’s earthquake-induced tremors. Suncorp rallied 1.97 per cent and QBE 2.95 per cent. IAG inched up 0.1 per cent after reporting 435 claims in the wake of yesterday’s quake in Victoria. The company said it was too early to determine the full financial impact of the event.
Record full-year earnings lifted Premier Investments 3.19 per cent. The retail group almost doubled earnings from last year’s Covid-affected result, rising 88 per cent to $351.9 million. Net profit climbed 97.3 per cent to $271.8 million. Chair Solomon Lew said he was optimistic about the outlook despite temporary store closures impacting the first seven weeks of the new trading year.
“Premier remains optimistic about the all-important second quarter of FY22 as the vaccine rollout progresses and the economy re-opens,” he said. “Premier Retail has again made the strategic decision to invest in inventory and we have the appropriate supply chains to support this decision and ensure we are in stock of wanted product.”
News Corp jumped 7.56 per cent on plans to buy back up to US$1 billion of its stock. CEO Robert Thomson said the buyback was a sign of confidence in the business following the media group’s most profitable year since at least 2013.
AGL rose 6.16 per cent on a broker upgrade from JPMorgan Chase. Analyst Mark Busuttil raised his rating to ‘Overweight’.
Diversified metals miner Sandfire Resources entered a trading halt to raise funds to buy the MATSA mining complex in Spain for $2.572 billion. The “transformational acquisition” includes three underground mines and a processing facility. Sandfire will tap investors for $1.248 billion.
Sandfire said, “The acquisition of MATSA is expected to be accretive to Sandfire’s earnings and cash flow per share in its first full year of ownership (FY23), transforming Sandfire’s growth trajectory and providing a cornerstone asset with an anticipated mine life of over 10 years.”
Going down
Transurban eased 0.1 per cent after completing the institutional component of a raising to fund its share of the NSW Government’s stake in the WestConnex toll road in Sydney. The institutional offer raised $2.9 billion. A retail offer on the same terms opens on September 27.
Newcrest tracked the gold price down 0.46 per cent. CSL eased 0.38 per cent.
Telix sagged 4.71 per cent after the US regulator extended the review period for the company’s prostate cancer imaging product by three months. Shares in the cancer imaging specialist have more than tripled this year as its flagship product moved closer to market.
Among stocks trading ex-dividend, Cochlear shed 0.5 per cent and Cash Converters 1.89 per cent. Shine Justice firmed 0.4 per cent.
Other markets
Gold continued to fade with demand for havens. The yellow metal dropped US$16.40 or 0.93 per cent to US$1,762.40 an ounce.
Oil added to last night’s rise. Brent crude inched up four US cents or 0.05 per cent to US$75.43 a barrel.
The dollar was steady at 72.31 US cents.
