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A resilient ASX clung to the 6200 support level as positive signals on stimulus measures here and in the US helped offset negative overnight leads.
The S&P/ASX 200 reached mid-session 21 points or 0.3 per cent in the red at 6208 after dropping as low as 6199 in the wake of heavy US losses.
What’s driving the market
The market pared early falls as US index futures rallied on reported progress on stimulus negotiations and after RBA Assistant Governor Chris Kent told a webinar the central bank had room to cut the cash rate.
S&P 500 futures bounced eight points or 0.2 per cent after a Democrat spokesperson tweeted that House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin “continued to narrow their differences” in talks this morning. The update resurrected hopes the two sides can reach a deal on a new coronavirus relief package before the November 3 presidential election.
“The Speaker continues to hope that, by the end of the day Tuesday, we will have clarity on whether we will be able to pass a bill before the election,” Pelosi’s Deputy Chief of Staff Drew Hammill said.
US stocks plunged overnight amid a lack of progress in breaking the stalemate. The S&P 500 sagged 1.63 per cent and the Dow shed 411 points or 1.44 per cent.
Back home, expectations for a possible rate cut next month firmed after RBA Assistant Governor Kent said there was still room to cut the cash rate from a record low 0.25 per cent. Kent would not speculate on details of further easing but said another option was for the central bank to buy longer-dated bonds. The dollar eased 0.2 per cent to 70.4 US cents in the wake of the speech.
Going up
Technology and traditional defensive sectors led this morning’s fightback as BHP, Rio Tinto and the banks dragged. Toll road operator Transurban was the best of the index heavyweights, rising 0.9 per cent. Goldminer Newcrest gained 0.9 per cent, supermarket Coles 0.7 per cent and iron ore miner Fortescue Metals 0.6 per cent.
Buy now pay later stocks shone. Afterpay cracked $100 for the first time, rising 6.1 per cent after announcing a partnership that will allow the company to offer transaction and savings accounts and cashflow management tools to Westpac’s 3.3 million customers. Rival Z1P rose 2.3 per cent on news of a new ‘Tap & Zip’ product feature.
Hearing implants manufacturer Cochlear climbed 1.7 per cent to its strongest price since February after reporting a recovery in revenues as elective surgeries resumed following pandemic stoppages. Elsewhere in the sector, Fisher &Paykel rose 1.8 per cent and Ansell 1.2 per cent.
Utilities and REITs supported the advance. GPT Group climbed 2.6 per cent, Waypoint 1.9 per cent, Mercury NZ 1.7 per cent, Cromwell Property 1.4 per cent and APA Group 0.2 per cent. Stockland faded 0.6 per cent ahead of this afternoon’s virtual AGM.
Going down
A 2 per cent increase in Q1 production over the same period last year failed to inspire investors in BHP. Shares in the Big Australian sank 1.2 per cent. CEO Mike Henry said copper production in South America continued to be impacted by measures to contain the spread of Covid-19. Rio Tinto eased 0.8 per cent.
The big four banks fell away as the morning wore on. CBA faded 0.4 per cent, ANZ 0.1 per cent, NAB 0.6 per cent and Westpac 0.5 per cent. Other heavyweights to lose ground included insurer IAG, down 1.3 per cent, and Woodside Petroleum, down 1.1 per cent.
Jewellery retailer Lovisa retreated 1.7 per cent after reporting a 10.2 per cent decline in global store sales over the 16 weeks since the start of the financial year, compared to the same period last year.
Other markets
A subdued morning on Asian markets saw China’s Shanghai Composite dip 0.2 per cent, Hong Kong’s Hang Seng rise 0.1 per cent and Japan’s Nikkei fall less than 0.1 per cent.
Oil markets remained downbeat despite the bounce in US stock futures. Brent crude cents slid 36 cents or 0.8 per cent to $US42.26 a barrel. Gold dropped $5.30 or 0.3 per cent to $US1,906.40 an ounce.
What’s hot today and what’s not:
Hot today: Resources & Energy Group (ASX:REZ) more than doubled in value after initial drilling at the company’s East Menzies Gold Field Project struck high-grade gold. Results from two of the first five holes of a 32-hole campaign struck significant mineralisation. Executive Director Richard Poole described the hits as “an amazing initial drill result”. He added, “The results support the overwhelming evidence that the East Menzies Gold Field is one of Australia’s best and most overlooked exploration target areas.” The share price charged 115.6 per cent to 6.9 cents.
Not today: Ecofibre (ASX:EOF) lost a quarter of its market value after revenue and cashflow fell short of analyst estimates last quarter. The hemp grower reported revenues of $7.1 million, down 5 per cent from the previous quarter and 51 per cent from the prior corresponding period. The company said it expected to report a loss for the half and was targeting a flat result for the financial year. The share price tumbled 26.5 per cent.
