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The share market rose for a third day as the stimulatory boost from last night’s Federal Budget outweighed weak leads from Wall Street after President Donald Trump torpedoed stimulus negotiations.
The S&P/ASX 200 shrugged off a sluggish start to reach mid-session 51 points or 0.9 per cent ahead. A close around these levels would be the index’s highest finish in more than four weeks.
What’s driving the market
A two-speed market saw gains in winners from last night’s budget outweigh declines in resource stocks after the failure of US stimulus talks lit a fire under the US dollar, pressuring dollar-denominated commodity prices. Retailers, shopping centre operators and other companies that stand to benefit from last night’s cash splash steered the market higher.
US stocks tumbled after the White House walked away from negotiations for a new coronavirus relief package. President Trump accused the Democrats of not negotiating in good faith. He declared he would cease discussions until after next month’s election.
“I have instructed my representatives to stop negotiating until after the election when, immediately after I win, we will pass a major Stimulus Bill that focuses on hardworking Americans and Small Business,” he tweeted. In a later tweet he accused “Crazy Nancy Peolosi and the Radical Left Democrats” of “playing games with the desperately needed Workers Stimulus Payments”.
NAB currency strategist Rodrigo Catril called Trump’s move “a big gamble”. “History tells us that the state of the economy is a big factor that can determine election outcomes. Going into an election with a weakening economy more often than not means Presidents don’t get re-elected.”
The S&P 500 responded with a dive of 1.4 per cent. This morning’s action in US index futures hinted at further weakness tonight. S&P 500 index futures were recently off nine points or 0.3 per cent.
Going up
Companies exposed to a pick-up in retail spending after yesterday’s tax cuts saw solid gains. Household appliances manufacturer Breville Group climbed 3.7 per cent, cat dealership chain Eagers 4.5 per cent, shopping centre operator Unibail-Rodamco-Westfield 3.2 per cent and fruit and veg retailer Costa Group 3.4 per cent. Harvey Norman rose 1.8 per cent to a seven-month peak. JB Hi-Fi gained 3 per cent.
Retailer Wesfarmers was the best of the market heavyweights, rising 2.6 per cent. Property group Goodman tacked on 1.9 per cent, supermarket Woolworths 1.9 per cent and rival Coles 1.2 per cent.
The financial sector gained momentum as the session wore on. Macquarie Group put on 1.9 per cent. The big four banks gained between 0.4 and 1 per cent.
Going down
Resource stocks were the biggest drag on the market after the collapse of stimulus talks triggered sharp dislocations in currency and commodity markets: the greenback surged, oil and metals dived. Newcrest slumped 2.7 per cent to its weakest level since mid-June. Fellow gold miner Ramelius Resources dropped 2.9 per cent, Resolute Mining 2.1 per cent and Regis Resources 1.9 per cent.
BHP sank 1.1 per cent and Rio Tinto 0.3 per cent. Fortescue Metals bucked the trend with a rise of 0.3 per cent.
Energy giant AGL fell 0.7 per cent after more than 25 per cent of shareholders voted against the Remuneration Report at today’s virtual AGM. Chair Graeme Hunt said the company would engage with shareholders and review its remuneration structure.
Other markets
Oil and gold crumbled with US stocks. Brent crude slumped 78 cents or 1.8 per cent this morning to $US41.87 a barrel. Gold skidded $30.40 or 1.6 per cent to $US1,878.40 an ounce.
A mixed morning on Asian markets saw Hong Kong’s Hang Seng edge up 0.1 per cent, while Japan’s Nikkei eased 0.4 per cent. Chinese markets were closed for the last day of Golden Week.
The dollar fell 1.2 per cent to 71.02 US cents.
What’s hot today and what’s not
Hot today: Investors in junior explorer American Rare Earths (ASX:ARR) have seen their investment more than triple in value since last week when President Trump declared the US’s dependence on imported rare earth minerals a national emergency. Shares that were trading at 3.4 cents before Trump issued his executive order reached 12.5 cents today, rising for the fourth time in five sessions. The company has projects in Arizona and Wyoming and said it was well positioned to take advantage of strategic initiatives offered by the US government.
Not today: Investors in Emerge Gaming (ASX:EM1) appeared underwhelmed by the latest subscription figures for the online gaming company’s MTN Arena Platform. The share price slumped more than 10 per cent before paring its fall to 6.5 per cent after the company announced it had passed 25,000 registered subscribers. CEO Gregory Stevens said the platform was “scaling effectively” and he was “excited to be generating revenue that is growing daily”.
