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The share market staged its strongest rally in more than two weeks, supported by strong leads and upbeat updates from retailers and gold miners.   

The S&P/ASX 200 climbed 61 points or 0.83 per cent to its highest level since mid-September. The advance was the market’s fourth in five sessions.

Ten of eleven sectors rose, led by tech and industrial stocks. Brambles, Transurban and Macquarie Group were the best of the heavyweights.

What’s driving the market

Corporate earnings dominated trading on both sides of the Pacific. Wall Street’s major indices rallied towards all-time highs overnight as third-quarter reports continued to beat expectations. The Dow climbed 0.56 per cent as Johnson & Johnson and Travelers continued a run of strong results. The S&P 500 gained 0.74 per cent.

The ASX played catch-up after under-performing Wall Street in recent weeks. While the Dow and S&P 500 moved within 1 per cent of records overnight, the ASX 200 was this morning still more than 2.8 per cent below its mid-August peak.

Market sentiment here was boosted by generally well-received company updates as the annual general meeting season rolled on and quarterly reports trickled in. Retailers Kogan, Adairs and Super Retail Group saw gains (more below). Origin Energy and miners Evolution and OZ Minerals also rallied.

Investors took in their stride a surge in long-term interest rates to their highest in eight months. The yield on ten-year Australian government bonds hit 1.863 per cent this morning and was last up nine basis points.

Rates have risen sharply over the last two months from below 1.1 per cent as rising energy prices and supply chain issues fuel inflation. Overnight, US crude hit a fresh seven-year high.

“Concerns loom that rising prices will put upward pressure on the input costs of corporates, which will eventually pass on high prices to consumers,” Kalkine Group CEO Kunal Sawhney said. “Besides, speculations are rife that higher energy prices could trigger demand destruction and cap US economic growth, which might lead to a return of 1970s style ‘stagflation’.”

The rise in yields increases pressure on the Reserve Bank to raise official rates sooner than current guidance implies.

“Rate hike bets have surged amid a more complex inflation scenario with less transitory elements in advanced economies like the US and New Zealand. Fears loom that the underlying inflationary pressures could build more quickly than currently envisaged in Australia, prompting the RBA to scale back pandemic-era stimulus,” Mr Sawhney said.

Going up

Linen seller Adairs was the pick of the retailers holding AGMs this morning, rising 3.06 per cent. The company reported Q1 online sales increased 15 per cent above the same period last year and it expects pent-up demand to drive foot traffic ahead of Christmas as the country reopens.

Super Retail Group gained 1.92 per cent on news online sales jumped 96 per cent year to date to increase their share of group sales to 30 per cent. Gross margin improvements have been sustained in the first 16 weeks of the new year.

The Reject Shop inched up 0.33 per cent after CEO Andre Reich warned the “operating environment remained uncertain” and stock availability had been impacted by shipping delays.

Kogan jumped 7.96 per cent on news the online retailer had cleared an inventory backup that impacted recent earnings updates. The reduction in inventory allowed the firm to close overflow warehouses, reducing costs by $800,000 per month.

An upgrade to gold production guidance lifted miner OZ Minerals 0.1 per cent. The company reaffirmed full-year copper guidance and raised its gold projection to 220,000-243,000 ounces from previous guidance of 205,000-228,000.

Evolution Mining beat its quarterly gold production guidance, producing 170,681 ounces versus a predicted 155,000 – 167,000 ounces. The share price rose 1.34 per cent.

Origin Energy firmed 1.18 per cent after reaffirming full-year earnings guidance. Earnings were expected to recover by $150 – $250 million as wholesale energy prices flow through to tariffs.

At the heavyweight end, Brambles gained 2.56 per cent, Wesfarmers 1.66 per cent and Transurban 1.62 per cent. Miners BHP, Rio Tinto and Fortescue Metals put on between 0.3 and 1.4 per cent. The big four banks gained 0.5-1.2 per cent. Macquarie Group’s record run stretched to a seventh session and a gain of 1.76 per cent.

Going down

Flight Centre slipped 5.01 per cent despite news international bookings tripled between July and September, surpassing domestic bookings for the first time since the start of the pandemic. Managing Director Graham Turner told today’s AGM total transaction value more than doubled to $1.6 billion over the first quarter, compared to the same period last year.

Beach Energy slid 4.18 per cent after reporting a 4 per cent decline in production during the first quarter and an 8 per cent drop in sales revenue.

Whitehaven Coal sagged 7.1 per cent after China’s state planner reportedly threatened to intervene in coal markets to tackle soaring prices. Chinese thermal and coking futures hit limit down in response, according to ForexLive.

Coronado shed 5.43 per cent and New Hope 4.98 per cent.

Other markets

Asian markets mostly advanced. The Asia Dow added 0.66 per cent, Hong Kong’s Hang Seng 1.15 per cent and Japan’s Nikkei 0.72 per cent. China’s Shanghai Composite dipped 0.17 per cent. US futures were flat.

Brent crude dropped 30 US cents or 0.35 per cent to US$84.78 a barrel from last night’s three-year closing high.

Gold bounced US$2.40 or 0.14 per cent to US$1,772.90 an ounce.

The dollar firmed 0.17 per cent to 74.87 US cents.

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