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Records for banking giants Commonwealth and Macquarie Group helped lift the ASX towards a third straight gain.
The S&P/ASX 200 rallied 44 points or 0.58 per cent to 7471 by mid-session. A close at that level would be the strongest finish in eight weeks.
The financial sector climbed back towards last week’s four-and-a-half-year peak. Gold miners and property stocks also strengthened. Tech and energy stocks declined.
What’s driving the market
The market continued to put last week’s rates jitters behind it even as the Reserve Bank once again ruled out a rate rise next year. In its quarterly monetary policy statement, the bank said its central scenario was for a first increase in 2024.
“In some other plausible scenarios, wages growth and inflation could be higher than implied by the central scenario. If this were to eventuate, an increase in the cash rate in 2023 could be warranted. However, in the Board’s view, the latest data and forecasts do not warrant an increase in the cash rate in 2022,” the statement said.
The dollar sank below 74 US cents, down 0.23 per cent to 74.9 US cents.
Commonwealth Bank and Macquarie Group hit fresh highs despite a further decline in long-term interest rates in the wake of the RBA statement. The yield on ten-year Australian government bonds fell seven basis points towards a fifth straight loss.
Lenders benefit from higher rates through the opportunity to expand margins. CBA shares hit a record $109.79 before trimming their rise to 1.04 per cent at $109.63. The bank this morning increased its fixed mortgage rates in the face of rising borrowing costs.
Macquarie Group topped out at $204.22. Shares in the investment bank were last up 0.72 per cent at $203.39.
NAB gained 1.17 per cent and ANZ 0.26 per cent. Westpac fell 2.24 per cent as its shares traded without the rights to a dividend.
Overnight, the S&P 500 rallied 0.42 per cent to a sixth straight all-time closing high. The Nasdaq Composite put on 0.81 per cent. Declines in lenders dragged the Dow down 0.09 per cent.
“There are a couple of positive factors that seem to have impacted investing sentiment: signs that monetary policy will stay accommodative even as the central bank begins to shun its bond-buying program, the progress that US employers are making in filling a near-record number of open positions, as private payrolls increased by 408,000 in October,” Kalkine Group CEO Kunal Sawhney said.
“Currently, investors are likely to be satisfied that the Fed seems to be in no rush to get rid of the policy punch bowl.”
Going up
Takeover interest lifted superannuation administrator Link 11.2 per cent to a ten-week peak. Private-equity firm Carlyle pitched a conditional, non-binding indicative offer valuing its target at $5.38 per share, a 24.4 per cent premium to yesterday’s close. The Link board said it would suspend its share buyback while it considered the proposal.
News Corp surged 9.56 per cent after raising first-quarter revenues by 18 per cent to US$2.5 billion. CEO Robert Thomson said it was the most profitable quarter since the company’s relaunch in 2013. Profitability increased by 53 per cent from the prior corresponding period.
A 22 per cent lift in first-quarter revenues boosted shares in online property advertising group REA by 6.98 per cent to an all-time high. Earnings jumped 28 per cent year-on-year to $157 million.
Property manager GPT edged up 0.58 per cent as the company continued its expansion into logistics to offset the pandemic hit to retail assets. Logistics now makes up a quarter of the portfolio. CEO Bob Johnson said the sector was experiencing strong investment and tenant demand.
Other property companies to advance included Cromwell +5.25 per cent, Lendlease +1.74 per cent and Goodman +0.66 per cent.
Gold miners rallied after a decline in US treasury yields helped raise the yellow metal almost US$30 overnight. Newcrest gained 4.01 per cent, Northern Star 6.76 per cent and Silver Lake Resources 3.92 per cent.
Going down
Prang of the day was Clinuvel Pharmaceuticals. The biotech sagged 15.36 per cent following a downgrade from Jefferies from ‘Buy’ to ‘Hold’. Shares in the firm had doubled since February.
British banking group, Virgin Money UK slumped 11.41 per cent after flagging higher costs to accelerate its digital banking strategy. Restructuring costs to speed up the shift to digital at the NAB spin-off were reportedly twice what analysts anticipated.
Afterpay declined 3.41 per cent following a negative reaction to American suitor Square’s earnings release this morning. Square shares fell 3.22 per cent in extended US trade.
Other markets
A red morning on Asian markets kept US futures in check. S&P 500 futures eased two points or 0.04 per cent.
The Asia Dow dropped 1.01 per cent, China’s Shanghai Composite 0.5 per cent, Hong Kong’s Hang Seng 1.54 per cent and Japan’s Nikkei 0.59 per cent.
Oil bounced off a four-week low. Brent crude rallied 68 US cents or 0.54 per cent to US$81.22 a barrel.
Gold added to overnight gains, rising US$3 or 0.17 per cent to US$1,796.50 an ounce.
