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A surge in commodity prices as China reopened helped propel Australian shares towards a third straight winning week as the mood on global markets improved.

The S&P/ASX 200 jumped 51 points or 0.71 per cent by mid-session.

Strong gains in iron ore and copper helped lift the materials sector to a six-week high. Tech stocks also rose firmly in line with the overnight trend in the US.

What’s driving the market

Expectations for a recovery in demand as China lifts Covid restrictions saw substantial moves in a range of Australian exports. Spot iron ore prices jumped 5.1 per cent in China. Copper rallied 4.8 per cent in US trade. Van Eck’s exchange-traded fund of rare earths/strategic metals rallied 5.1 per cent.

“Pandemic restrictions in the world’s largest consumer had weighed on demand in recent months. With those now being lifted, the market is looking to a boost to demand as economic activity picks up,” ANZ senior commodity strategist Daniel Hynes said.

Wall Street’s steady recovery from last month’s lows continued as weak payrolls data suggested rate increases were taking effect. In the looking-glass world of financial markets, bad news for the economy is currently seen as market-friendly because it reduces pressure for aggressive rate increases.

The S&P 500 jumped 1.84 per cent, extending its recovery from last month’s 52-week low to 9.6 per cent. The Nasdaq Composite put on 2.69 per cent.

“The major Wall Street indices closed higher last night, led by heavy-weight tech stocks, especially FAANG stocks [Facebook, Apple, Amazon, Netflix, Google] whose sky-high values tend to give the broader market a harder push higher or lower,” Kunal Sawhney, chief executive of research group Kalkine, said.

“Further cues about the health of the US economy will come tonight when the Labor Department releases the employment report for May. Of late, the jobs market bounced back strongly with low unemployment and higher job postings after a slow recovery initially.”

The greenback fell with last night’s jobs setback, increasing the appeal of dollar-denominated commodity prices for holders of other currencies. The Australian dollar climbed more than 1 per cent to its highest in six weeks. The Aussie was lately buying 72.57 US cents.    

Going up

BHP advanced 2.63 per cent to its highest since mid-April as bulk metal miners responded to positive pricing signals. Fortescue Metals put on 4.12 per cent, Rio Tinto 2.68 per cent and Champion Iron 7.38 per cent.

Diversified miner OZ Minerals added 5.14 per cent. South32 gained 2.01 per cent.

The commodities rally brought relief at the end of a challenging week for investors in green metals. Pilbara Minerals bounced 6.14 per cent, Liontown Resources 6.3 per cent and Mineral Resources 4.99 per cent.  

A four-week high in gold boosted the local sector. De Grey rose 5.77 per cent, Gold Road Resources 5.91 per cent and Ramelius 4.13 per cent. Newcrest put on 1.48 per cent.

The volatile tech sector tracked the latest upswing on the Nasdaq. WiseTech advanced 5.41 per cent, Afterpay parent Block 4.41 per cent and Altium 4.28 per cent.

Going down

Diagnostic imaging provider Healius dropped 7.45 per cent after warning of a “difficult” second half. The company said it was trading broadly in line with revised guidance but was experiencing high levels of Covid infections among staff and patients.

“Healius announces that its unaudited underlying EBIT for the year-to-date to May 2022 is in the order of $473 million, with strong trading in the first half but more difficult market conditions in the second half of the financial year,” the company said.

Traditional defensive assets faced selling pressure as investors rotated into sectors with better upside potential.

Protective wear manufacturer Ansell fell 3.49 per cent following a downgrade from Credit Suisse. Domino’s Pizza cooled 1.88 per cent. Gas infrastructure provider APA Group shed 1.92 per cent.

Insurers IAG and QBE fell 0.58 and 0.87 per cent, respectively.

A retreat in bond yields kept the banks in check. NAB dipped 0.4 per cent. CBA shed 0.5 per cent.

Other markets

In Asia, the regional Dow gained 0.39 per cent. Japan’s Nikkei rallied 1.12 per cent. Markets in China and Hong Kong closed for a holiday.

US futures inched higher. S&P 500 futures added three points or almost 0.1 per cent.

Gold built on last night’s four-week high. The yellow metal firmed US$4.10 or 0.2 per cent to US$1,875.20 an ounce.

Oil kept most of last night’s 1.1 per cent advance.  Brent crude eased six US cents or 0.05 per cent to US$117.55 a barrel.

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