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A downbeat week for Australian investors looked set to end with a strong recovery as gains in mining stocks lifted the market towards its first gain in five sessions.

The S&P/ASX 200 rallied 73 points or 1 per cent, reversing all but two points of this week’s loss. A positive close this afternoon would break a four-session losing run, the benchmark’s longest since mid-August.

BHP, Rio Tinto and Fortescue Metals led the advance as worries over China’s struggling property market temporarily receded. The major supermarkets and banks also rose.

What’s driving the market

Iron ore and copper rebounded amid signs China was moving to ease pressure on its struggling property market. Overnight, the Wall Street Journal reported regulators were exploring changes to make it easier for developers to buy assets from floundering rivals. Current regulations have compounded the property market’s woes by making healthy companies reluctant to take on troubled projects.

“We are trying to correct over-tightening,” Wang Jun, chief economist at Zhongyuan Bank, told Reuters. “We should ensure normal start and completion of projects, otherwise there could be impact on home buyers and suppliers.”

Shares in Chinese developers have rallied since reports of changes first emerged. Also helping sentiment, Evergrande, the poster boy for the market’s struggles, again averted a default by making interest payments on its debt.  

The news helped lift iron ore 5.3 per cent yesterday and copper 1.8 per cent. Aluminium , nickel and other industrial metals also rallied.

Australian suppliers of raw materials moved off multi-month lows yesterday and extended those gains this morning. Rio Tinto climbed 4.12 per cent, Fortescue Metals 3.69 per cent and BHP 3.38 per cent. Champion Iron added 4.35 per cent, Nickel Mines 3.38 per cent and South32 4.03 per cent.

“It seems that investors have already digested [yesterday’s] weak employment report for October, which brought the labour market recovery into question. Moreover, investors appear to be looking past the hotter-than-expected US inflation report, which has raised concerns around the broader economic recovery from the pandemic,” Kalkine Group CEO Kunal Sawhney said.  

Wall Street offered a generally supportive platform for today’s rally. The Nasdaq Composite put on 0.52 per cent and the S&P 500 0.06 per cent. The Dow eased 0.44 per cent, mostly due to an earnings miss from Disney.

“While a surge in inflation initially tripped up major indices on Wall Street, most U.S. stocks rebounded last night on the back of the recovery in technology stocks. It seems that investors have largely digested the latest inflation report that showed the biggest 12-month jump in consumer price index since November 1990,” Mr Sawhney said.

Going up

Ten of eleven sectors advanced. Besides, materials, the next-best performer was consumer staples as a two-day rebound in market rates slowed. Coles put on 3.14 per cent, Woolworths 1.59 per cent and IGA operator Metcash 1.21 per cent.

The tech sector rebounded from its lowest level in almost a month. Xero gained 2.47 per cent, WiseTech 1.32 per cent and Afterpay 1.05 per cent.

An index of Australian gold mining stocks hit a three-month high following the yellow metal’s longest win streak since May. Gold rose 0.8 per cent overnight, bolstered by hedging in the wake of hot inflation reports from the US and China this week.

Gold Road Resources put on 4.53 per cent, Regis 4.21 per cent, Perseus 2.91 per cent and Ramelius 3.48 per cent. Newcrest eased 0.43 per cent.

Gains among the big four banks ranged from 0.44 per cent for Westpac to 0.94 per cent for NAB. ANZ added 0.46 per cent and CBA 0.56 per cent.

AusNet rose 1.16 per cent after the federal regulator waved through a takeover by Canadian asset manager Brookfield. Written approval by the Foreign Investment Review Board brings the deal one step closer to conclusion. AusNet shareholders have yet to vote on the proposal.

A takeover offer for its banking and credit management business lifted shares in financial records specialist Link 3.36 per cent. A syndicate led by Pepper European Servicing offered $86.5 million for the division. Link said it would consider the proposal.

Buy now pay later operator Z1p Co rose 3.33 per cent from a ten-month low after completing the acquisition of central European BNPL provider Twisto Payments. Z1p said the deal would offer a platform for accessing the European Union market.  

Going down

Lendlease slid 1.78 per cent after CEO Tony Lombardo told shareholders earnings would be skewed to the second half of the financial year as the construction company battles Covid-19 headwinds. This year’s statutory profit will be impacted by a restructuring charge of $130-$170 million and impairments of $230 – $290 million.

There was little resistance to this morning’s market upswing. At the heavyweight end, toll road operator Transurban dipped 0.11 per cent and pokie-maker Aristocrat Leisure 0.03 per cent..

Healthcare was one of the few pockets of weakness. Fisher & Paykel slipped 2.83 per cent, ResMed 1.62 per cent, Ramsay 1.59 per cent and Healius 0.42 per cent.

Chalice Mining trimmed a three-day surge that carried the nickel miner above $10 for the first time. The share price eased 0.6 per cent to $9.95.

The biggest float of the week landed with a whimper. Employment services firm APM Human Resources fell 6.76 per cent from its listing price.

Other markets

US futures rallied following a broadly positive start to Asian trade. S&P 500 futures firmed 12 points or 0.25 per cent.

The Asia Dow gained 1.08 per cent, Hong Kong’s Hang Seng 0.88 per cent and Japan’s Nikkei 1.06 per cent. China’s Shanghai Composite slid 0.1 per cent.

Oil reversed overnight gains. Brent crude dropped 46 US cents or 0.57 per cent to US$82.40 a barrel.

Gold retreated for the first time in seven sessions. The yellow metal eased US$3.50 or 0.2 per cent to US$1,860.40 an ounce.

The dollar fell 0.11 per cent to 72.83 US cents.

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