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Shares bolted higher, outpacing gains in the US where investors bet the long-term benefits of higher stimulus spending under a Democrat-controlled Congress would outweigh short-term turmoil in Washington.
The S&P/ASX 200 rallied 119 points or 1.8 per cent to 6726 by mid-session. The advance reversed yesterday’s fall and lifted the index above 6700 for the first time this year.
What’s driving the market
US stocks scaled fresh highs overnight as the Democrats secured control of the Senate by winning two seats in a ‘runoff’ race in Georgia. The victories offer President-elect Joe Biden a clear path to get his legislative agenda through Congress. Stocks advanced amid expectations of higher stimulus spending and possible investments in infrastructure and green energy.
Wall Street pared gains after Trump supporters stormed the Capitol Complex, delaying the ratification of Electoral College votes, a key step towards confirming Biden as president. Politicians resumed the count late this morning after the chambers were secured.
“The violence was quelled, the Capitol is secured, and the people’s work continues,” Vice President Mike Pence said.
US futures strengthened as counting resumed. S&P 500 index futures climbed 21 points or 0.6 per cent.
Overnight, the Dow Jones Industrial Average finished 438 points or 1.44 per cent ahead after being up more than 600 points. The S&P 500 added 0.57 per cent. The Nasdaq slumped 0.61 per cent amid concerns tech giants face tighter control and higher taxes under a Democrat-controlled Congress.
Back home, the local market hit its highest level of the year. Resource stocks led the way, lifting the materials sector to a level last visited before the global financial crisis. Helping sentiment was news NSW and Victoria both recorded zero locally-acquired Covid cases in the last 24 hours.
Going up
Banks and iron ore majors did the heavy lifting. Fortescue Metals climbed 3.8 per cent to a new peak. BHP surged 6.2 per cent to its strongest level in at least 20 years. Rio Tinto gained 6.5 per cent.
“Iron ore prices are welcoming new year with a bang, climbing to over US$168 overnight,” Kalkine Group CEO Kunal Sawhney said. “The global supply deficit created by the Brazilian giant Vale and increased demand from the Chinese steel industry has been driving the iron ore rally. Since November, the prices are rising exponentially. Now, the eyes are all set on touching the high levels of US$200, that will definitely bring more cheer to the miners in the near term.”
The big four banks shook off their recent malaise after the US financial sector jumped 4.4 per cent overnight. ANZ rallied 4.9 per cent, Westpac 4.7 per cent, NAB 3.4 per cent and CBA 2.7 per cent.
Additional heavyweight support came from the likes of Woolworths +1.7 per cent, Coles +1.6 per cent, Wesfarmers +0.8 per cent and Telstra +0.3 per cent.
Woodside Petroleum rose 3.3 per cent after crude oil settled above US$50 a barrel in the US for the first time since March. Oil Search gained 6.8 per cent and Santos 5.6 per cent.
Going down
The technology sector fell to a three-week low following a decline on the Nasdaq. Xero shed 4.5 per cent, EML Payments 4.4 per cent and Megaport 3.6 per cent. Sector leader Afterpay gave up 4.4 per cent.
An on-going slump in the US dollar pressured health stocks with significant US earnings. CSL fell 0.7 per cent and Cochlear 1.1 per cent.
Gold stocks sank after the yellow metal fell 2.3 per cent overnight. Silver Lake Resources shed 4.8 per cent, Westgold 3.3 per cent and Newcrest 0.4 per cent. Losses were tempered by a post-settlement rebound as rioters stormed Capitol Hill. Gold for February delivery was last up $13 or 0.7 per cent to $US1,921.70 an ounce, reversing around a third of last night’s loss.
Other markets
Asian markets followed US leads. China’s Shanghai Composite and Hong Kong’s Hang Seng edged up 0.1 per cent. Japan’s Nikkei added 1.6 per cent.
Oil extended overnight gains. Brent crude rose eight cents or 0.15 per cent to $US54.38 a barrel.
The dollar trimmed an overnight rally to its highest level since April 2018. The Aussie was last down 0.24 per cent at 77.97 US cents.
Hot today
Video technology company Atomos (ASX:AMS) hit a ten-month peak after beating first-half sales guidance. The company recorded sales of $32.6 million as business recovered from the Covid downturn. The company had previously forecast sales of circa $28 million. The share price rose 12.2 per cent to $1.10.
