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A casino bidding war and record highs for mining giants BHP and Rio Tinto powered the ASX to its strongest level in 14 months.
The S&P/ASX 200 surged as much as 86 points in morning action before trimming its advance to 77 points or 1.09 per cent mid-session. At today’s peak, the index moved within 30 points of last year’s all-time high.
Record iron ore and copper prices helped lift the nation’s largest producers to fresh heights. Crown Resorts jumped more than 7 per cent after Star Entertainment entered the contest for the troubled casino group.
What’s driving the market
The share prices of BHP and Rio Tinto trailled soaring bulk metal prices last week, but played catch-up in convincing fashion this morning. BHP soared 3.82 per cent, surpassing its March peak by more than 50 cents. Rio jumped 3.15 per cent. Fortescue Metals peaked in the second week of the year, but rocketed up 6.57 per cent today.
Iron ore took wing last week, flying up 14.1 per cent after China’s latest swipe at Australia sharpened fears the steel ingredient will be the next pawn in a simmering trade war. Speculative mania appeared to infect other metal markets, with copper rising 3.2 per cent to surpass a ten-year high-water mark.
“We’re in uncharted territory right now and the market is a bit frothy. The industrial players are in panic mode since there’s not much supply,” Gianclaudio Torlizzi, partner at Milan consultancy T-Commodity, told Reuters.
Crown Resorts jumped 7.22 per cent after Star Entertainment submitted a conditional, non-binding indicative merger proposal. Star said a merger would be “highly accretive” for shareholders in both companies, delivering cost synergies of between $150 and $200 million per annum. Separately, rival bidder Blackstone raised its offer by 50 cents per share. Star shares climbed 7.16 per cent to a pandemic-era high.
The market shrugged off a jump in the dollar after the greenback was lowered by weak US jobs data. The Aussie hit its highest level since late February before easing 0.21 per cent to 78.41 US cents.
US stocks closed at record levels on Friday as traders interpreted disappointing April jobs figures as supporting the case for central bank support for longer. The S&P 500 climbed 0.74 per cent. The Dow added 0.66 per cent.
“A lacklustre rebound points to ongoing weakness in the recovery, justifying the need for stimulus,” NAB Director of Economics, Tapas Strickland, said. “The reaction in markets was risk-on, with equities lifting and the USD falling sharply,” he added.
Back home, business confidence and conditions recorded their strongest readings since 1997, as measured by NAB’s monthly survey. The confidence gauge rose to +26 from +17 and conditions improved to +32 from +24. A separate report showed retail sales increased by 1.3 per cent last month and were 2.2 per cent higher than a year ago.
Going up
The materials sector climbed for a fifth day, soaring 2.91 per cent to a new peak. While the big three did the heavy lifting, there were significant gains further down the food chain. Pilbara Minerals gained 7.42 per cent, Evolution Mining 5.52 per cent, Champion Iron 5.38 per cent and Mineral Resources 4.04 per cent. Gold giant Newcrest put on 2.67 per cent.
Woolworths rose 2.38 per cent after flagging plans to demerge its drinks and hospitality business. If the demerger is approved, eligible shareholders will receive one share in Endeavour Group for every Woolworths share. Woolworths would retain a 14.6 per cent interest in the demerged group.
Three of the big four high-street banks advanced. NAB gained 1.31 per cent, Westpac 1.07 per cent and CBA 1.02 per cent. ANZ dropped 0.99 per cent as it traded without the right to a dividend.
Pendal announced it had bought US investment manager Thompson, Siegel & Walmsley for US$320 million. The Australian fund manager also reported a 64 per cent increase in half-year statutory net profit to $89.9 million. Shares were in a trading halt, pending a capital raising.
Gaming group PointsBet put on 1.84 per cent on news it will acquire US-based Premier Turf Club for US$2.9 million. Cleanaway rose 0.89 per cent after announcing Mark Schubert will replace Vik Bansal as CEO and Managing Director. Schubert joins the company from Origin Energy.
Going down
A profit downgrade sent A2 Milk down 9.26 per cent to a three-and-a-half-year low. A back-up of excess inventory and weak Chinese sales forced the NZ-based dairy company to revise its sales and profit expectations.
“It is clear that the challenges in the daigou/reseller and CBEC [cross border e-commerce] channels have been exacerbated by excess channel inventory and difficulties with visibility,” the company said.
Rival Bubs also touched a three-and-a-half-year low, declining 5.33 per cent.
Another shutdown at its Waggaman ammonia plant sent Incitec Pivot shares down 11.52 per cent. The company said the plant reopened for two weeks before a vibration probe failed, followed by a coupling in the refrigeration compressor, forcing successive shutdowns. The stoppages are expected to put a $26 – $33 million hole in the company’s net profit after tax.
Travel and tourism stocks were mixed following weekend news Covid restrictions will remain in Greater Sydney for at least another week, and the federal government does not expect to reopen international borders until next year. Corporate Travel Management shed 2.8 per cent. Qantas lost 0.63 per cent. Sydney Airport rallied 1.27 per cent, Webjet 1.15 per cent and Flight Centre 0.13 per cent.
Other markets
US futures advanced with Asian markets. S&P 500 futures climbed 10 points or 0.23 per cent. The Asia Dow put on 0.52 per cent, Hong Kong’s Hang Seng 0.27 per cent, Japan’s Nikkei 0.89 per cent and China’s Shanghai Composite 0.1 per cent.
Oil started the week at a sprint. Brent crude charged 55 cents or 0.79 per cent to US$68.82 a barrel. Gold gained $1.50 or almost 0.1 per cent at US$1,832.80 an ounce.
