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The share market overcame soft US equity futures and a mixed morning in Asia to reach mid-session at a five-week high.

The S&P/ASX 200 rallied 34 points or 0.46 per cent towards its seventh gain in eight sessions.

A broad rally lifted nine of the eleven sectors. Telstra, Woodside Petroleum and Woolworths set the pace. Afterpay, Perpetual and Kogan were notable losers.

What’s driving the market

Investors found enough in Friday’s mixed performance in global equities and commodities to lift the domestic benchmark to its highest since mid-September. The rally continued an upward trend since the start of the month.

Natixis portfolio manager James Beaumont expects cyclical stocks to outperform as economic growth regains momentum and rising bond yields constrain growth stocks.

“After September’s hiccup – when we finally got a 5% correction after a year without one, equity markets have since then resumed their positive trend supported by strong economic signals and positive earnings surprises. In that sense, we continue to see room for a rotation again into cyclical and value stocks, especially after the rebound seen in bond yields and improving Covid conditions,” Beaumont said.

US equities closed mixed on Friday after Federal Reserve Chair Jerome Powell said the central bank was ready to reduce its bond-buying program while leaving rates on hold.

“I do think it is time to taper,” Powell said.I don’t think it is time to raise rates.”

The Dow rose 0.21 per cent to a new closing high. The broader S&P 500 dipped 0.11 per cent to its first loss in eight sessions.

“Powell’s comments lead us, and the market, to believe that tapering will not only be announced out of next week’s FOMC [Federal Open Market Committee] meeting but more likely than not will commence almost straight away, rather than wait until December,” NAB Head of FX Strategy Ray Attrill said. “On a $15bn per month tapering each month, already indicated by the Fed as the most likely magnitude, the Fed would be done by June.”

The local market wobbled mid-morning before recovering as US futures trimmed an initial decline. S&P 500 futures were lately off three points or less than 0.1 per cent.

In Asia, the Dow eased 0.21 per cent, China’s Shanghai Composite 0.23 per cent, Hong Kong’s Hang Seng 0.41 per cent and Japan’s Nikkei 0.75 per cent.

Going up

The top end of the market was nearly all green. Telstra climbed 2.68 per cent on news the federal government will bear most of the cost for its acquisition of the South Pacific’s leading telco, Digicel. The government will contribute US$1.33 billion and Telstra US$270 million. Telstra will own and operate the business, which has 2.5 million subscribers in PNG, Samoa, Tonga, Vanuatu, Nauru and Fiji.

A broker upgrade helped Macquarie Group crack $200 per share for the first time. Citi raised its recommendation to ‘Neutral’ from ‘Sell’. Shares in the investment bank rose as high as $202.50 before trimming their advance to 1.12 per cent at $201.31.

Gains in crude, gold and iron ore helped lift Woodside Petroleum 3.18 per cent, Newcrest 1.48 per cent, Rio Tinto 1.39 per cent, Fortescue Metals 1.22 per cent and BHP 0.96 per cent.

Other notable rises included Woolworths +1.58 per cent, Wesfarmers +1.18 per cent and Goodman +0.65 per cent.

Origin Energy hit an 11-month high after selling a 10 per cent stake in its liquefied natural gas joint venture in Queensland for $2.12 billion. EIG will take 10 per cent in Australia Pacific LNG, leaving Origin with 27.5 per cent, Sinopec with 25 per cent and ConocoPhillips 37.5 per cent. Origin shares climbed 3.28 per cent.

“Divesting a 10 per cent interest allows Origin to crystalise some of the significant value we have created in Australia Pacific LNG, while retaining upside to further value creation through a continuing substantial shareholding,” Origin CEO Frank Calabria said.   

Mineral Resources bounced 8.79 per cent on plans to restart its Wodgina lithium mine. The mine was placed in care and maintenance in November 2019. Lithium prices have since rebounded significantly.

Viva Energy climbed 1.07 per cent despite reporting lockdowns knocked 25 per cent off fuel sales in NSW and Victoria during the September quarter, compared to the same period last year. Jet fuel sales fell 31 per cent.

Going down

Technology was the worst of the sectors following the Nasdaq’s under-performance in the US. The tech-heavy US benchmark skidded 0.82 per cent on Friday in the wake of underwhelming updates from Intel and Snap.

Here, Nearmap shed 3.79 per cent, Afterpay 2.17 per cent, EML Payments 2.21 per cent and Altium 1.35 per cent.

Perpetual gave back most of last week’s rise, falling 5.93 per cent. Other notable falls included Kogan -4.05 per cent and Aurizon -3.56 per cent.

Employee management services firm Smartgroup slumped 13.38 per cent after a consortium of potential buyers walked back a takeover offer. The bidders, comprising TPG Global and Potentia Capital, revised their “non-binding, indicative and conditional” offer from $10.35 to $9.25 per share after four weeks of due diligence. Smartgroup said it had decided to terminate negotiations.  

Other markets

Oil trimmed its longest run of weekly gains on record. Brent crude eased 58 US cents or 0.67 per cent to US$84.96 a barrel. On Friday, crude wrapped up a ninth straight weekly advance with a gain of 0.9 per cent.

Gold dipped US$2.40 or 0.13 per cent to US$1,793.90 an ounce.

The dollar firmed 0.11 per cent to 74.77 US cents.

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