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The ASX shrugged off revived concerns about the global economic outlook as gains in technology and defensive stocks outweighed declines in energy and travel companies.  

The S&P/ASX 200 wobbled both sides of break-even before picking a direction, rising 34 points or 0.5 per cent by mid-session as CBA and Rio Tinto gained traction.

What’s driving the market

A third straight decline in borrowing costs encouraged traders to buy growth stocks and bond surrogates that attract investment flows when yields drop. The yield on ten-year Australian bonds slid seven basis points to 1.67 per cent this morning, reversing the last of last week’s rise. REITs, healthcare and tech stocks all rose.

Energy stocks and industrials declined in the wake of an overnight retreat from cyclical sectors with the greatest dependence on global growth. Oil tumbled amid fears renewed and extended lockdowns in Europe and rising Covid rates in other parts of the world will slow the recovery.

“Market sentiment has switched in the last 24 hours, with concerns that the economic recovery from COVID-19 might be slower than anticipated,” NAB Director and Senior Economist David de Garis said. “Oil prices are down by over 6% on concerns about the demand outlook over coming months in light of the likely delayed recovery in Europe due to extended lockdowns,” he added.

Declines on Wall Street ranged from 0.76 per cent for the S&P 500 to 1.12 per cent for the Nasdaq Composite. Energy stocks, airlines, cruise companies and hotels led the retreat.

“We can see some shift in investors’ psychology away from the cyclical energy and financial stocks that outperformed earlier this year amid economic recovery forecasts,” Kalkine Group CEO Kunal Sawhney said.

Going up

Property giant Goodman Group surged 3.2 per cent to a five-week high as worries about this year’s spike in rates continued to abate. Charter Hall Group put on 2.5 per cent, SCA Property Group 1.2 per cent and Stockland 1 per cent.

Funds continued to flow back to bond alternatives punished during this month’s rates storm. Wesfarmers gained 2.3 per cent, CSL 1.8 per cent and Transurban 0.2 per cent. Supermarkets Woolworths and Coles tacked on 1.6 and 1.2 per cent, respectively.

The tech sector continued to repair. Xero was the sector’s best performer, rising 3 per cent after acquiring Swedish e-invoicing business Tickstar for around $22 million. Afterpay added 0.9 per cent, WiseTech 2.8 per cent and Appen 1.3 per cent.

The largest of the big four banks, CBA, rallied 1.6 per cent, offsetting weakness among the rest. NAB and ANZ dipped 0.3 per cent. Westpac dropped 1.2 per cent after New Zealand’s central bank ordered independent reports into risk governance and liquidity risk management at the bank’s NZ operations.

Premier Investments climbed 3.6 per cent to a two-month peak after almost doubling its half-year net profit. Record Peter Alexander sales helped lift the fashion retailer’s half-year NPAT by 88.9 per cent to $188.2 million.

Cereals and oils handler GrainCorp rose 2.7 per cent after announcing it expects to generate an additional $25 million in earnings by 2023-24 through using excess port capacity following the demerger of its malting business.

Going down

Energy stocks chased the price of crude lower. Brent crude dived 5.9 per cent overnight into a technical correction, defined as a close more than 10 per cent below its peak. Woodside dropped 1.1 per cent, Santos 1.7 per cent and Oil Search 3.1 per cent.

Travel and tourism stocks were lowered by Covid setbacks in Europe, where vaccination programs have fallen short of expectations. Webjet shed 3.4 per cent, Flight Centre 3.2 per cent, Corporate Travel Management 2.2 per cent and Qantas 0.8 per cent.

“New pandemic curbs and slow vaccine rollouts in Europe are serving as fresh headwinds for travel stocks,” Kalkine CEO Sawhney said.  “Germany has extended its lockdown until 18 April, and Chancellor Angela Merkel urged citizens to stay at home for five days over the Easter holiday.”

The big three bulk metals producers were mixed. Fortescue Metals fell 0.7 per cent. Rio Tinto bounced 2.1 per cent and BHP 0.5 per cent. Gold miner Newcrest gained 0.3 per cent.

Telstra eased for just the second time in nine sessions, falling 0.8 per cent from yesterday’s eight-month closing high.

An index of speculative stocks declined for a fourth straight day. The S&P/ASX Emerging Companies Index eased 0.8 per cent after Wall Street’s small cap benchmark took its biggest hit since June. The ASX Small Ords dropped 0.2 per cent.

Other markets

The mood on Asian markets was downbeat. The Asia Dow declined 0.86 per cent. China’s Shanghai Composite dropped 0.51 per cent, Hong Kong’s Hang Seng 0.21 per cent and Japan’s Nikkei 1 per cent.

US futures inched higher. S&P 500 futures advanced two points or less than 0.1 per cent. Nasdaq futures gained a more bullish 0.46 per cent.

Brent crude bounced 16 cents or almost 0.3 per cent to US$61.02 a barrel. Gold gained $1.50 or 0.1 per cent at US$1,726.60 an ounce.

The dollar also mounted a tentative recovery, rising 0.07 per cent to 76.12 US cents.

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