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The share market rallied back towards record levels as the end of the financial year triggered a flurry of institutional buying.

The S&P/ASX 200 rose 42 points or 0.58 per cent to its strongest level in eight sessions. The rally erased more than a week of downward drift since a surge in Covid-19 cases cast a cloud over the domestic outlook.

All but four of the heavyweights of the S&P/ASX 20 advanced. Telstra, Rio Tinto and Fortescue Metals were the pick of the market leaders. Newcrest, CSL, Afterpay and CBA declined.

What’s driving the market

The last session of the financial year often brings strong buying as fund managers polish their portfolios before reporting results to investors. So-called “window dressing” can be ephemeral, but not always. This time last year, the index put on 1.4 per cent on June 30, then another 160 points over the first three sessions of this financial year.

The market mood was very different then: stock prices were still recovering from the February-March pandemic plunge. This time around, the market is a handful of points off its all-time high. At today’s peak, the index drew within 16 points of its June 16 record close.

The financial year-end brought a welcome distraction from the steady dripfeed of dour coronavirus news from health authorities. Alice Springs will join Greater Sydney, Darwin, Perth and swathes of Queensland in lockdown after a potentially infected miner passed through the town airport.

New South Wales reported 22 new locally-acquired cases in the 24 hours to 8pm last night. Queensland recorded two new local cases, South Australia four and Victoria one.

US stocks inched higher overnight but mostly ended well shy of their highs. The Dow cut a 100+ point rally to nine points or 0.03 per cent. The S&P 500 also finished with a meagre gain of 0.03 per cent. The Nasdaq held most of its advance, adding 0.19 per cent.

“Modest gains in US stocks pushed the Nasdaq Composite and S&P 500 to new records on Tuesday as investors grew anxious over the increased spread of the Delta variant,” Kalkine Group CEO Kunal Sawhney said. “While economically sensitive stocks rallied during the early trading session following the release of upbeat consumer confidence data, technology stocks primarily led the market gains.”

Growth in China‘s services sector activity fell short of expectations. The June non-manufacturing PMI released this morning eased to 53.5 from 55.3 last month. Economists had tipped a similar result to last month. The manufacturing PMI came in at 50.9, bang on target.

Going up

Telstra hit its highest level since the start of the pandemic. The share price rose 4.31 per cent on news the telecom sold 49 per cent of its mobile towers business for $2.8 billion. A consortium comprising the Future Fund, Commonwealth Superannuation Corporation and Sunsuper bought the stake in Telstra InfraCo Towers.

“Telstra’s objective in seeking a strategic partner has been to maximise overall value for our shareholders, maintain control of the assets and agree terms that secure Telstra’s mobile network leadership and competitive differentiation into the future. I am pleased that we have been able to achieve that ahead of schedule through this transaction announced today,” CEO Andrew Penn said.

Rio Tinto rose 2.24 per cent as buyers brushed off news the company halted operations at its Richards Bay Minerals mineral sands mine in South Africa and declared force majeure on customer contracts. The mine has been blighted by violence apparently triggered by disputes over the employment of locals.

Iluka Resources was the index’s best performer, jumping 8.97 per cent to a nine-year high. The mineral sands miner is seen as one of the prime beneficiaries of Rio Tinto’s decision to halt mining at Richards Bay.   

BHP climbed 1.41 per cent and Fortescue Metals 2.2 per cent. Most of the big four banks advanced.  ANZ gained 0.28 per cent, NAB 0.63 per cent and Westpac 0.19 per cent. CBA dipped 0.4 per cent.

Vicinity Centres shrugged off the resignation of CFO Nick Schiffer, rising 0.16 per cent.

Going down

Nuix‘s woes continued. Shares in the data analytics firm sank 13 per cent to a new low after it confirmed media reports it is under investigation by the Australian Securities and Investments Commission (ASIC). The corporate regulator is investigating the firm’s former CFO, Stephen Doyle, as well as possible breaches of the Corporations Act. Nuix said it had not received formal notification of the nature of the twin investigations, but would cooperate.

A downbeat earnings outlook overshadowed a demerger announcement from AGL Energy. The company will split into two publicly-listed businesses. One will contain its power stations, the other its retail businesses. Shareholders seemed more concerned by news this year’s earnings will be at the lower end of guidance and were expected to fall again next year. The share price sank 8.56 per cent.

“For FY22, AGL Energy continues to anticipate a material step-down in earnings as a result of the lower wholesale electricity prices of the past two years now being realised through forward sold positions, as well as… increases to wholesale gas supply costs,” the company said.

Gold stocks were pressured by the yellow metal’s decline to its weakest level since mid-April. Newcrest dipped 1.32 per cent, St Barbara 1.15 per cent and Northern Star 1.06 per cent.

At the pointy end of the market, Afterpay slipped 0.71 per cent and CSL 0.74 per cent.

Other markets

A subdued morning in Asia left most major markets little changed. The Asia Dow edged up 0.1 per cent, China’s Shanghai Composite 0.25 per cent and Hong Kong’s Hang Seng 0.02 per cent. Japan’s Nikkei dipped 0.02 per cent.

S&P 500 futures firmed four points or 0.1 per cent.

Oil added to overnight gains. Brent crude improved 42 cents or 0.57 per cent to US$74.70 a barrel.

Gold ticked up 50 cents or 0.05 per cent to US$1,764.10 an ounce.

The dollar bounced 0.11 per cent to 75.21 US cents.

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