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A run of wild share market swings continued with a fifth straight triple-digit move, this time to the upside following an end-of-week rally on Wall Street.
The S&P/ASX 200 surged as much as 120 points in early action before halving its gain to 63 points or 0.87 per cent by mid-session. The market trimmed its advance following news trade in China’s struggling Evergrande property group has been suspended.
The rally extended a series of sharp moves in both directions. The market ended last week at a four-month low after the biggest rally of the year was succeeded by a 147-point fall on Friday.
Ten of eleven sectors advanced on low, holiday-affected volume. Bank, utility and consumer stocks spearheaded the push. The defensive healthcare sector retreated.
What’s driving the market
Volatility has increased dramatically over the last week as investors weigh domestic optimism as locked-down eastern states near reopening against overseas headwinds, including political gridlock in the US and turmoil in Chinese real estate.
Heightened volatility generally corresponds with market declines, according to a US study by Crestmont Research. The ASX 200 finished last week at its lowest since early June, 5.5 per cent off its August all-time high. Today’s rally merely reversed around half of Friday’s loss. An old investment adage says markets take the stairs up, but the elevator down.
“Investors will need to hang on tight during the typically tumultuous ride in October, which saw 36% higher volatility [in the US] when compared with the average for the other 11 months,” CFRA chief investment strategist Sam Stovall told CNBC.
Wall Street laid the foundations for today’s advance with a bright start to the new month. The S&P 500 rose 1.15 per cent on Friday. The Dow gained 1.43 per cent.
US equity futures briefly continued higher this morning amid optimism over efforts to deal with one of the market’s biggest worries. Bloomberg reported House Democrats moved over the weekend to break a deadlock over President Joe Biden’s infrastructure spending bill.
The rally stalled after trade in China’s troubled Evergrande property group was halted on the Hong Kong stock exchange. The developer has been struggling to make loan repayments. Fears of a damaging default have been one of the major down-pressures on global stocks over the last month.
Hong Kong’s Hang Seng index fell 0.74 per cent. The Asia Dow dropped 0.76 per cent and Japan’s Nikkei 0.33 per cent.
S&P 500 futures trimmed their rise to a point or 0.03 per cent after earlier rising as much as 0.3 per cent. Trade on mainland China was suspended until Friday for Golden Week.
Going up
Travel stocks rose ahead of next Monday’s ‘Freedom Day’ in New South Wales. Flight Centre jumped 8.42 per cent to its highest since March 2020. Webjet gained 4.95 per cent, Corporate Travel Management 2.71 per cent and Qantas 2.1 per cent.
Commonwealth Bank firmed 4.15 per cent after completing a $6 billion off-market share buy-back. The largest of the big four banks bought back roughly 3.8 per cent of its issued shares. The offer was so popular the bank had to scale back applications by 79.4 per cent.
ANZ improved 1.88 per cent, NAB 1.43 per cent and Westpac 1.38 per cent. Macquarie Group put on 0.44 per cent.
Furniture retailer Nick Scali surged 10.29 per cent after acquiring specialist sofa retailer Plush-Think for $103 million in cash. Plush has 46 showrooms across Australia.
Boral gained 3.77 per cent after completing the sale of its North American building products business for US$2.15 billion and the sale of its Australian timber business for $64.5 million. The building materials firm will use the proceeds to reduce debt and return excess capital to shareholders.
Utilities were among the pick of the sectors following a pause in surging bond yields at the end of last week. Origin Energy gained 3.05 per cent, APA Group 1.04 per cent and AGL Energy 1.73 per cent.
Going down
The iron ore majors declined with a modest retreat in ore prices at the start of the Golden Week holiday in China. Fortescue Metals slid 1.34 per cent, Rio Tinto 0.78 per cent and BHP 0.35 per cent. The spot price of ore dipped 1.1 per cent on Friday.
In the wider mining space, Pilbara Minerals shed 1.8 per cent, Champion Iron 3.23 per cent and Orocobre 1.56 per cent.
Health giant CSL eased 0.41 per cent during a soft morning for the sector as investors favoured sectors with better exposure to the economy. Pro Medicus slid 2.14 per cent, ResMed 1.46 per cent and Fisher & Paykel 0.89 per cent.
Tech stocks were mixed. Xero dropped 2.09 per cent, Technology One 1.32 per cent and Altium 1.5 per cent. A 1.48 per cent lift in Afterpay kept the sector ahead.
Other markets
Oil eased before tonight’s OPEC+ meeting. Brent crude declined ten US cents or 0.13 per cent to US$79.18 a barrel.
Gold jumped US$6.80 or 0.4 per cent to US$1,765.20 an ounce, following the Evergrande news.
The dollar slipped 0.12 per cent to 72.66 US cents.
