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Positive leads from Wall Street and strong trading updates from Fortescue Metals and Origin Energy helped power the share market to a fresh nine-month high.
The S&P/ASX 200 climbed 30 points or 0.4 per cent to 7498 by mid-session.
Fortescue Metals led a rally in bulk metal miners after reporting record first-half iron ore shipments. Battery metal miners chased two days of gains in global peers across the Australia Day break. An earnings upgrade lifted takeover target Origin Energy 1.5 per cent.
What’s driving the market
Australian investors returned from the holiday break to find Wall Street solidly higher after an overnight rally got the market back on track after a volatile swing session on Wednesday. Stocks plunged in early action on Wednesday night before dip-buyers lifted the market back near where it started.
Stocks struggled again in early trade overnight before building strongly after lunch. The S&P 500 finished 1.1 per cent higher. The Nasdaq Composite continued to outperform the other benchmarks, rising 1.76 per cent as traders bought the growth stocks that fell hardest last year.
“The Nasdaq fell 8.52% in January 2022 before losing a further 24% during the year. At today’s close, the Nasdaq is up 10.16% in January 2023, an interesting statistic for those who believe that January sets the tone for the remainder of the year,” Tony Sycamore, market analyst at IG, said.
Tech was this morning’s best-performing sector on the ASX, rising 1.7 per cent. Fortescue’s trading update helped lift the materials sector 0.31 per cent. Energy and healthcare were the only significant drags.
In economic news, wholesale inflation cooled last quarter, a welcome sign for the outlook for interest rates. The producer price index rose 0.7 per cent in the December quarter, the weakest growth since Q1 2021. The annual change in prices was 5.8 per cent, down from a peak of 6.4 per cent the previous quarter.
Going up
Tech and battery metal miners provided today’s best returns. Megaport rallied 6.06 per cent, Liontown Resources 5.03 per cent and WiseTech 4.31 per cent.
Steelmaker BlueScope climbed 3.86 per cent to its highest since May after repaying US$300 million of debt early and increasing its loan facility. Collectively, the transactions will reduce the firm’s financing costs.
Record quarterly iron ore shipments lifted Fortescue Metals 0.85 per cent to a 17-month high. December-quarter shipments of 49.4 million tonnes sealed a record half of 96.9 million tonnes, up 4 per cent on H122. Costs were 3 per cent lower than the previous quarter. Full-year shipment and cost guidance was unchanged.
The other members of mining’s ‘Big Three’, BHP and Rio Tinto, gained 0.8 and 0.85 per cent, respectively.
Takeover target Origin Energy put on 1.5 per cent after raising earnings guidance to reflect higher natural gas and electricity profits. The company expects full-year underlying earnings of $600-$700 million, up from previous guidance of $500-$650 million. Brookfield and EIG are carrying out due diligence on a potential acquisition of the company.
Another takeover target, Tyro Payments, popped 3.68 per cent to $1.55 after offering suitor Potentia four weeks to improve its offer. Tyro has rejected two non-binding indicative offers of $1.27 and $1.60 per share as undervaluing the business. The company will allow Potentia to carry out due diligence to “develop a significantly improved proposal”.
Strong demand for flow generator devices for treating sleep apnoea helped ResMed raise revenues by 16 per cent last quarter to US$1.034 billion. Operating profit increased 14 per cent despite a 30 bps contraction in gross margin to 56.1 per cent.
“During the second quarter, we significantly increased production and delivery of flow generator devices to meet the incredible demand from customers, resulting in strong sales growth in the Americas, and solid overall performance for our business across 140 countries,” CEO Mick Farrell said.
Select Harvests bounced off a 15-year low after reporting its worst almond crop in ten years while global prices weakened. The quality of the grower’s 2022 crop was impacted by wet weather.
The combination of adverse weather and falling world prices cut the value of inventory from $6.80 per kilogram to a forecast $6.15-$6.30. Earnings will take an $18-$22 million hit from the drop. The share price traded as low as $3.62 before bouncing 3.84 per cent to $4.06.
Going down
Coal stocks slumped after a double-digit decline in the price of coal. New Hope shed 7.01 per cent. Whitehaven gave up 5.97 per cent. Coronado lost 2.61 per cent.
Gold’s first loss in six sessions weighed on miners. Regis Resources lost 4.19 per cent, Newcrest 1.55 per cent and West African Resources 1.57 per cent.
Viva Energy was unchanged after the competition regulator and foreign investment review board cleared the company’s plan to acquire the Coles Express retail business. The transaction is expected to complete next quarter.
Aside from gold miner Newcrest, the biggest drags at the heavyweight end of the market were Woodside -0.95 per cent, CSL -0.82 per cent and Aristocrat Leisure -0.34 per cent.
Other markets
A mixed morning on Asian markets saw the Asia Dow lift 0.63 per cent and Hong Kong’s Hang Seng add 0.21 per cent, while Japan’s Nikkei shed 0.11 per cent. Chinese mainland exchanges remained closed for the Lunar New Year.
US futures sank after a big earnings miss from Intel. S&P 500 futures declined 12 points or 0.29 per cent.
Oil added to an overnight gain of US$1.35. Brent crude advanced 19 US cents or 0.22 per cent to US$87.47 a barrel.
Gold bounced US$1 or 0.06 per cent to US$1,931 an ounce after falling US$12.60 overnight to its first loss in six sessions.
The dollar firmed 0.13 per cent to 71.23 US cents.
