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Aussie shares blasted to new heights as investors played catch-up with two days of solid gains in the US across the long weekend.
The S&P/ASX 200 rallied 62 points or 0.85 per cent to 7374 by mid-session. At its peak, the index drew within six points of 7400 for the first time.
A broad rally lifted 18 of the 20 heavyweights of the S&P/ASX 20. Retail conglomerate Wesfarmers, biotech CSL and BNPL leader Afterpay led the charge. The big four banks and most of the heavyweight miners advanced.
What’s driving the market
Investors took their cues from record closes in the US either side of the Queen’s birthday long weekend. The S&P 500 put on 0.19 per cent on Friday and added another 0.18 per cent overnight.
US futures showed no nerves ahead of a Federal Reserve meeting that may set the tone on global equity and bond markets for the foreseeable future. S&P 500 futures rose five points or 0.12 per cent this morning.
The Fed starts a two-day meeting tonight and will release a policy update tomorrow night. The central bank faces mounting calls to prepare to tighten policy to contain inflationary pressures. Hedge fund billionaire Paul Tudor Jones said investors should bet on inflation if the Fed continues to ignore consumer price pressure.
“If they say, ‘We’re on path, things are good,’ then I would just go all in on the inflation trades. I’d probably buy commodities, buy crypto, buy gold,” Jones told CNBC.
Back home, the minutes of this month’s Reserve Bank showed board members still expect underlying inflation to rise only gradually over the next two years, allowing the bank to maintain “highly supportive monetary conditions“. The bank does not expect to raise the cash rate until actual inflation is “sustainably within the 2 -3 per cent target range”.
“A pick-up in inflation and wages growth was expected, but this was likely to be only gradual and modest,” the minutes noted. “In the central forecast scenario, inflation in underlying terms was expected to be 1½ per cent in 2021 and 2 per cent in mid 2023. The reversal of some COVID-19-related price reductions would see inflation temporarily rise above 3 per cent in the June quarter before falling back below the target.”
Going up
This morning’s charge of the market heavyweights was led by Wesfarmers +2.42 per cent, CSL +2.28 per cent and Afterpay +2.23 per cent. Coles added 1.98 per cent, Transurban 1.5 per cent and Woolworths 1.26 per cent.
Bank of Queensland climbed 1.25 per cent after announcing it expected to reduce provisioning for bad debts by $75 million. The reduction reflected “the improved economic outlook”.
Elsewhere in the financial sector, Macquarie Group gained 1.76 per cent, CBA 1.87 per cent, ANZ 0.96 per cent, NAB 0.83 per cent and Westpac 1.03 per cent.
Rio Tinto was the best of the mining giants, rising 0.65 per cent. Fortescue added 0.65 per cent. BHP eased 0.06 per cent.
Troubled data analytics firm Nuix bounced 4.15 per cent on news its CEO and CFO had walked the plank. Chief Executive Officer Rod Vawdrey will retire following weeks of media scrutiny over one of the biggest IPO flops of the last 12 months. Chief Financial Officer Stephen Doyle will leave “by mutual agreement”.
An earnings upgrade boosted Sims 1.8 per cent to a three-year high. The metals recycler revised its full-year underlying EBIT to $360 – $380 million from previous guidance of $260 – $310 million. The company said it had seen an improvement in margins and scrap prices.
Suncorp edged up 0.71 per cent after assuring investors the maximum downside from wild weather in Victoria was $50 million. The insurer said it had received roughly 3,750 claims following several days of heavy rain, severe winds and flash flooding. The company has a full-year natural hazard allowance of $950 million, plus reinsurance for any additional payouts.
REA Group firmed 2.14 per cent on news the online property advertiser acquired a 34 per cent stake in Simpology, which provides mortgage application tech and e-lodging to brokers and lenders. The stake will cost $15 million.
Medical device manufacturer ResMed soared 6.84 per cent to an all-time high after a rival was forced to recall ventilation devices.
Going down
Gold was among the biggest losers over the long weekend, falling roughly $30 in two down-legs. Newcrest eased 1.64 per cent, Ramelius 3.42 per cent and Gold Road Resources 2.3 per cent.
The battle for Crown Resorts continued to heat up. US private-equity operator Oaktree pitched a revised offer that would allow Crown to buy out James Packer’s 37 per cent stake in the casino group, held through Consolidated Press Holdings. The Crown board said it had not yet formed a view on the offer. Crown shares eased 0.57 per cent.
An earnings downgrade sent Austal down 7.73 per cent. The shipbuilder cut its full-year earnings outlook to $112 – $118 million from previous guidance of $125 million, citing delays in programs and higher costs caused by Covid border closures.
Takeover target McPherson’s dived 17.65 per cent on news Arrotex Australia walked away after carrying out due diligence. Arrotex withdrew a conditional offer of $1.60 per share. McPherson’s reaffirmed its full-year guidance.
Uranium stocks plunged following reports of problems at a Chinese reactor. Paladin Energy sank 14.78 per cent, Deep Yellow 7.78 per cent and Boss Energy 8.11 per cent.
Other markets
Asian markets traded mixed as trade resumed after long weekends in some countries. The Asia Dow rallied 0.22 per cent. China’s Shanghai Composite shed 0.77 per cent and Hong Kong’s Hang Seng 1.09 per cent. Japan’s Nikkei gained 0.73 per cent.
Gold continued to deflate, falling $2.20 or 0.12 per cent to US$1,863.60 an ounce. Brent crude was little changed, up five cents or 0.07 per cent to US$72.91 a barrel.
The dollar declined 0.1 per cent to 77.04 US cents.
