Aussie shares rebounded from a two-week low as the big banks added their weight to a tug of war between rising cyclical and falling growth stocks.
The S&P/ASX 200 rallied 34 points or 0.5 per cent by mid-session. Gains in energy, materials, financials and industrials outweighed declines in tech stocks and some of the bond proxies.
What's driving the market
Local action mirrored overnight ructions in the US amid portfolio rebalancing to reflect higher borrowing costs and an improving economic outlook. The scale of the rotation was underlined by a 0.09 per cent gain in the cyclical stock-heavy Dow even as the growth-heavy Nasdaq Composite plunged 2.46 per cent. The S&P 500 fell 0.77 per cent.
“The higher Treasury yields move up, the quicker investors are rotating out of high-flying tech stocks and into stocks in the Russell 2000 Index and Dow Jones Industrial Average,” OANDA senior market analyst Edward Moya wrote.
The Australian tech sector dived 4.6 per cent to a one-month low. Afterpay slumped 8.1 per cent, Megaport 4.6 per cent and WiseTech 3.4 per cent. The sector briefly tripled in value during the market rebound from the March lows.
The materials sector hit its highest level since 2008, fuelled by overnight gains in iron ore and industrial metals. ThinkMarkets analyst Carl Capolingua said share valuations had yet to catch up with extreme moves in metals.
"Stocks like BHP, RIO and FMG are at record highs, but those price gains have been more than compensated by earnings increases," he said. "So, when you look at the price to earnings ratio (PE) of the materials sector over the last month, it's actually fallen from around 13.8 to 12.5. I know that's what the fund managers are looking at, that's why the demand is there, and that's why share prices in the sector are rising. But I'm not sure how many mums and dads look at those price gains and realise just how many miners are cheaper than they were a month ago."
One consequence of the surge in commodity prices has been a three-year high in the dollar. The Aussie hit 79.3 US cents overnight and was lately up 0.1 per cent at 79.22 US cents.
Market heavyweights BHP and Rio Tinto marched 2.3 and 1.3 per cent, respectively, to all-time highs. Fortescue Metals gained 0.1 per cent.
Woodside Petroleum rebounded 4.6 per cent from three days of post-earnings weakness. An overnight reversal in gold lifted Newcrest 3 per cent.
The market moved decisively into positive territory following a late-morning rise in the banks. CBA gained 1.4 per cent, Westpac 1 per cent, NAB 0.2 per cent and ANZ 0.4 per cent. Bank of Queensland jumped 11.3 per cent after raising $673 million from institutional investors to buy ME Bank.
Oil Search soared 7.7 per cent as investors bet on a return to profit as energy prices recover. The oil and gas giant reported a full-year net loss of $320.7 million, reflecting last year's Covid-induced collapse in energy markets.
Adbri almost doubled its full-year net profit to $93.7 million and beat profit guidance. Shares in the construction materials supplier surged 7 per cent. A 19 per cent lift in half-year revenue to $947.8 million lifted engineering group Monadelphous 4.1 per cent.
Professional services firm Worley rallied 4.5 per cent in anticipation of a recovery as it executes on a $13.5 billion backlog of deferred projects. Underlying net profit almost halved to $117 million last half as customers postponed work.
Estia Heath added 1.5 per cent as investors looked beyond a $5.3 million half-year post-tax loss. The aged care operator said it made a $3.8 million profit before impairments and the hit from settling a shareholder class action.
SEEK sank 7.5 per cent after announcing a 6 per cent decline in half-year revenue and a reshuffle at the top. Andrew Bassat will move from CEO and MD to Executive Chairman and CEO of SEEK Investments. Ian Narev will succeed him as CEO and MD.
The rising dollar impacted revenues at Perenti Gobal, which generates more than half its business in the US. Shares in the mining services company dived 10.1 per cent
Utility APA Group dipped 0.1 per cent to an 11-month low after reporting a 0.6 per cent decline in half-year revenue and 2.3 per cent drop in earnings. A 31 per cent slump in net profit dragged Alumina down 3.9 per cent.
Ship builder Austal sank 10.1 per cent on news the president of its US operations had resigned following an investigation into its Littoral Combat Ship program. US authorities are investigating several matters relating to the program prior to 2016. Austal said it was cooperating with regulators.
A $187 million statutory full-year loss dragged G8 Education down 7.5 per cent. The childcare centre operator's business took a heavy hit from Covid lockdowns.
A record half briefly lifted Adore as much as 11 per cent before shares in the beauty products retailer faded to a loss of 2.3 per cent. The online business posted half-year revenue of $96.2 million, eight per cent ahead of the prospectus forecast when the company listed in October.
The Asia Dow edged up 0.22 per cent during a mixed session in Asia. China's Shanghai Composite fell 0.22 per cent and Hong Kong's Hang Seng 0.4 per cent. Japanese markets were closed for a bank holiday.
US futures gathered momentum late morning. S&P 500 futures rose seven points or 0.2 per cent.
Oil built on a 12-month overnight high. Brent crude rallied 79 cents or 1.2 per cent to $US65.15 a barrel.
Gold inched up $2 or 0.1 per cent to $US1,810.40 an ounce.