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The ASX 200 regained the 7400 level after a record night on Wall Street fuelled a broad rally.
The Australian benchmark rose 88 points or 1.2 per cent to 7413.
All 11 sectors advanced as the local market played catch-up with the US. The major miners shrugged off an 18-month low in spot iron ore prices. The banks ignored falling interest rates.
What’s driving the market
The ASX narrowed the performance gap with the US following a third straight night of record closes across the Pacific. The S&P 500 rose 0.37 per cent overnight as corporate earnings continued to surprise to the upside.
“Global risk sentiment overall continues to be supported despite more concerning headlines in China,” NAB Director, Economics, Tapas Strickland said. “The S&P500 rose 0.3% with a stellar earnings season again supporting.”
The S&P 500 has put on more than 23 per cent this year, more than twice the S&P/ASX 200’s 10.7 per cent. While much of the difference can be explained by the impact of lockdowns and worries over a slowdown in China, the ASX has struggled to keep up even as data indicated the domestic economy has regained momentum. A report this morning showed the building sector firing up.
Construction activity climbed to a five-month high as the eastern states emerged from lockdown. The Australian Industry Group/HIA index climbed 4.3 points last month to 57.6, its highest since June. However, volatile building approvals declined 4.3 per cent in September.
Today’s rally reversed a 46.5-point slump yesterday after the RBA cleared the way to higher rates. The central bank abandoned its policy of trying to contain bond yields and dropped a policy reference to the cash rate remaining on hold until 2024.
“Governor Lowe tried to push back against market pricing in his post-Meeting Speech, noting hikes as early as 2022 were “extremely unlikely”. Nevertheless, market scepticism remains high around the RBA’s guidance,” Mr Strickland said.
NAB expects the central bank to start raising the cash rate from the middle of next year. The bank’s economists expect rates to hit 2 per cent by the end of 2024.
Going up
Bargain-hunters snapped up the major miners at 11-month lows following a collapse in ore prices yesterday through the key US$100 a tonne psychological level. Fortescue Metals rose 2.72 per cent. Rio Tinto gained 0.85 per cent.
BHP climbed 1.52 per cent after engaging with rival bidder Wyloo Metals over plans to acquire Canada’s Noront Resources. BHP topped Wyloo’s bid for the nickel miner, but said it was now seeking Wyloo’s support for a “mutually beneficial arrangement” if its bid is accepted.
On the wider mining spectrum, Orocobre put on 8.03 per cent, Pilbara Minerals 4.75 per cent, Lynas Rare Earths 3.16 per cent and IGO 2.69 per cent.
AMP rallied 8.14 per cent after completing its exit from the life insurance industry. Resolution Life Group will buy out AMP’s 19.13 per cent interest in Resolution Life Australasia for $524 million. The divestment will strengthen AMP’s capital by $459 million.
Telstra inched up 0.26 per cent after the Department of Defence renewed a contract for network and telecommunications services. The contract will be worth more than $1 billion over five years.
Packaging company Amcor reaffirmed full-year guidance after increasing earnings per share by 4 per cent during a “challenging” first quarter. Sales were tempered by shortages of materials. Shares in the company firmed 1.72 per cent.
A decline in bond yields lifted bond proxies without denting lenders. Goodman Group tacked on 1.62 per cent, Coles 1.92 per cent, CSL 1.14 per cent and Wesfarmers 0.89 per cent.
Macquarie Group regained $200 a share with a rise of 2.83 per cent. The high-street banks advanced between 1 and 2.3 per cent.
Going down
Fewer than one in ten companies declined. Seven West Media eased 3.24 per cent following three straight gains since scooping up Prime Media. Telecom Uniti retreated 3.59 per cent.
The resignation of long-term board member Hamish Corlett helped push Tyro Payments down 2.22 per cent. Other notable falls included Crown Resorts -1.36 per cent, Treasury Wine Estates -0.56 per cent and Santos -0.42 per cent.
Other markets
A cautiously positive session on Asian markets saw the Asia Dow rise 0.08 per cent, China’s Shanghai Composite 0.17 per cent and Hong Kong’s Hang Seng 0.32 per cent. Trade in Japan was suspended for Culture Day. US futures were steady..
Oil turned lower ahead of tomorrow night’s OPEC+ meeting. Brent crude slumped 93 US cents or 1.1 per cent to US$83.79 a barrel.
Gold continued to fade, falling US$4.30 or 0.24 per cent to US$1,785 an ounce.
The dollar steadied after an overnight tumble, rising 0.04 per cent to 74.37 US cents after falling 1.2 per cent.
