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Traders took advantage of positive leads and weak volumes to drive the stock market up 2 per cent ahead of this afternoon’s RBA rate decision.

The S&P/ASX 200 climbed 120 points in holiday-affected trade to regain the 6000 level. The advance to 6072 positioned the index for back-to-back gains for the first time in almost three weeks.

What’s driving the market

The ‘race that stops the nation’ may not stop the stock market, but certainly impacts participation. With Victorians on holiday, trading volumes normally drop by 30-40 per cent on Cup Day, according to CommSec. Participation levels this year may be lower still with a rate decision and tonight’s US election overhanging the market.

US stocks bounced back overnight from their worst week since March. The S&P 500 rallied 40 points or 1.23 per cent as polling indicated a ten-point lead for Joe Biden.  

Back home, expectations were high that the Reserve Bank will this afternoon not only lower the cash rate, but unveil a swathe of broader measures to power the economy out of its pandemic malaise. An announcement is due at 2.30 pm EST.  

“Assuming all the relevant policy rates are reduced to 0.1 per cent from 0.25 per cent… as universally expected, market reaction should turn on what accompanies this by way of Quantitative Easing (QE),” NAB Head of FX Strategy Ray Attrill said. “The (also universal) expectation is that a QE programme will be announced and targeted primarily at the 5-10-year part of the yield curve… NAB’s assessment is that the RBA will need to convince the market they are prepared to buy at least $150bn worth of bonds… to justify the yield declines already seen over the course of October. Otherwise the market risks a ’buy the fact’ response, having sold the rumour during October.”

Going up

Oil’s first rise in four sessions fuelled a 5.1 per cent bounce in the energy sector. Oil Search climbed 6.9 per cent, Santos 6 per cent and Woodside 5.7 percent. Beach Energy jumped 7.2 per cent on news it will acquire Senex Energy’s Cooper Basin portfolio of assets for $87.5 million.

Company announcements were scarce as investors divided their attention between Martin Place, Washington and Flemington. Supply-chain logistics giant Brambles surged 6.2 per cent on a profit upgrade. The company raised its guidance to the upper end of the range previously advised after increasing sales revenue by 5 per cent over the first quarter.

Yield stocks fuelled yesterday’s 0.4 per cent market rally, and recorded smaller gains this morning. Stockland rose 5.3 per cent, Scentre Group 4 per cent, AGL Energy 1 per cent, Telstra 0.9 per cent and APA Group 0.2 per cent.   

The small and speculative ends of the market saw welcome rebounds after yesterday’s sell-off. The Small Ords bounced 2.2 per cent and the Emerging Companies Index 2 per cent.

At the top end, Macquarie Group put on 3.5 per cent, Wesfarmers 2.3 per cent, Rio Tinto 2.3 per cent, BHP 2.3 per cent, ANZ 1.6 per cent, CBA 1.2 per cent and NAB 0.5 per cent.

Going down

Exporters came under pressure following a South China Morning Post report that China was set to ban Australian copper and sugar imports this week. Copper giant Sandfire Resources acknowledged the report but said it was well positioned to divert sales to other markets. The company’s share price sank 6.5 per cent.

Other exporters appeared to be collateral damage amid fears China will broaden its one-sided trade dispute to target other sectors. Treasury Wine Estate fell 2.3 per cent, United Malt Group 0.4 per cent and A2M Milk Company 0.2 per cent.

Westpac was an outlier among financial stocks, falling 0.5 per cent on the back of yesterday’s disappointing full-year report.

Other markets

US index futures climbed ahead of Election Day. S&P 500 index futures rose 14 points or 0.4 per cent.

Asian markets followed Wall Street higher. China’s Shanghai Composite tacked on 0.5 per cent, Hong Kong’s Hang Seng 0.9 per cent and Japan’s Nikkei 1.4 per cent.

Oil gave back some of last night’s rebound gains. Brent crude eased nine cents or 0.2 per cent to $US38.88 a barrel. Gold gained $2.80 or more than 0.1 per cent at $US1,895.30 an ounce.

The dollar held most of its overnight gains, lately off 0.08 per cent at 70.46 US cents.

What’s hot today and what’s not:

Hot today: Early drilling success in Mexico boosted gold explorer Mithril Resources (ASX:MTH) to its highest level in a month. The first drillholes at the company’s El Refugio target at the Cometa Project in the highly-prospective Copalquin district intercepted “high grade veins”. CEO and Managing Director John Skeet said his team had “only scratched the tip of the iceberg”. The company has three more projects in the area. The share price was lately up 34.8 per cent at 3.1 cents.

Not today: Shares in oil producer Triangle Energy (ASX:TEG) hit an all-time low after BP announced it will close the refinery where TEG sends its crude for processing. BP announced on Friday it intends to cease all production at the Kwinana Refinery near Fremantle in WA. Triangle said it had not yet received a formal notice of termination. The share price hit a record-low 2 cents before paring its fall to 25 per cent at 2.4 cents.

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