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A relief rally powered the share market towards its first rise in five sessions after Wall Street welcomed the biggest US interest rate rise in 28 years.

A 71-point opening advance on the S&P/ASX 200 more than halved to 31 points or 0.47 per cent by mid-session. The market pared its rise after strong employment data suggested recent rate hikes have yet to slow hiring.   

The heavily-weighted banks trimmed early gains. Utilities and consumer staples declined as investors rotated out of defensive sectors into battered assets with more upside. REITs, tech and speculative stocks rose.  

What’s driving the market

The ASX joined a relief rally after US investors welcomed the biggest rate hike since 1994 as a sign central banks were serious about tackling inflation. The Federal Reserve raised the short-term federal funds rate by 75 basis points. Investors responded by lifting the S&P 500 1.5 per cent to its first gain in six sessions.

“It looked like a classic case of ‘buy the rumour, sell the fact’ as the dollar sold off and Wall Street rallied after the Fed’s 75-bps hike. And that’s despite Powell hinting at another 75-bps hike at their July meeting,” City Index senior market analyst Matt Simpson said.

US equity futures rose further this morning, sharpening hopes last night’s rally marked a turning point in a week-long plunge that drove the S&P 500 into a bear market. S&P 500 futures climbed 16 points or 0.42 per cent.

The Asia Dow firmed 0.82 per cent. Japan’s Nikkei gained 1.62 per cent. China’s Shanghai Composite turned negative late morning, falling 0.27 per cent. Hong Kong’s Hang Seng dipped 0.69 per cent.

The ASX trimmed gains in choppy trade after the economy added 61,000 jobs last month. The jobless rate held steady at 3.9 per cent, a 48-year low. The employment to population ratio hit an all-time high.

“We believe that with the employment market remaining tight, and no signs of inflation easing, the RBA is likely to raise interest rates by 50 basis points at its July meeting. The central bank is still chasing inflation,” Jamie Hannah, deputy head of investments at VanEck, said.

Today’s rally was spearheaded by some of the past week’s worst performers. The real estate investment trust sector bounced 2.4 per cent off a 21-month low. The speculative end of the market as measured by the S&P/ASX Emerging Companies Index rose 2.1 per cent from its weakest level since May last year.

Tech stocks climbed 1.4 per cent as bonds yields eased off eight-year highs. Higher borrowing costs weigh on companies whose valuations depend most on borrowing now to fund future growth.

The dollar bounced 1.7 per cent overnight as the greenback backed off recent highs. The Aussie was this morning trading at 70.19 per cent after falling as low as 68.5 cents on Tuesday.

Going up

Property stocks temporarily shook off worries about the impact of higher borrowing costs on dividend yields. HomeCo Daily Needs bounced 5.39 per cent. Charter Hall Retail gained 4.08 per cent. Sector giant Goodman firmed 3.62 per cent.

Appen led a strong rebound in the beaten-down tech sector, rising 9.41 per cent. NextDC tacked on 5.98 per cent, Megaport 4.02 per cent and WiseTech 2.85 per cent.

In the BNPL space, Zip Co rallied 4.5 per cent. Afterpay owner Block bounced 2.95 per cent.

An infant formula supplier agreement with US retail giant Walmart boosted Bubs shares by 9.29 per cent. Part of a second plane-load of formula sent under an emergency US scheme will go to 800 Walmart stores.

“The addition of Walmart will increase our bricks and mortar exposure in the United States over the coming days and weeks to around 4,800 stores across 35 States,” Bubs founder and CEO Kristy Carr said.

The Reject Shop jumped 20 per cent after reaffirming full-year guidance and reporting it was assessing an on-market share buyback. The discount retailer also announced former Officeworks executive Phil Bishop will join as CEO.

News of an on-market share buyback lifted Eagers Automotive 5.1 per cent. The car dealership announced it will buy back up to 10 per cent of issued share capital over 12 months from June 30.

Going down

A mid-morning fade in the major banks briefly threatened to drag the market into negative territory. The financial sector threatened an eighth straight loss after Westpac dropped 1.27 per cent. ANZ was flat. CBA and ANZ steadied the ship with rises of around 0.3 per cent.

Traditional havens gave back some of this week’s gains. Inghams shed 4.81 per cent, Nufarm 2.84 per cent and GrainCorp 2.41 per cent. AGL shed 1.98 per cent, Bega Cheese 1.67 per cent and Event Hospitality 1.43 per cent.

A double whammy of negative news drove Link Administration down 10.29 per cent. First, the competition regulator, the ACCC, said it had “significant preliminary competition concerns” about a takeover offer from Dye & Durham. Then Link’s UK subsidiary was hit with a lawsuit over the collapse of an equity income fund.

The board said it would defend the action and continued to unanimously recommend the proposed acquisition by Dye & Durham.

humm group shed 5.19 per cent as strong growth in its commercial arm failed to offset “significant” pressure on its consumer finance arm. Net receivables at Humm Commercial have risen by 70 per cent from this time last year. Net profit at Humm Consumer Finance has fallen 61 per cent.

Investment manager Australian Ethical faded 0.44 per cent after advising it expects to increase full-year underlying profit before performance fees by 9 per cent to between $9.8 and $10.2 million.

Engineering group Worley dipped 0.04 per cent after winning a ten-year contract to service Chevron’s onshore and offshore assets.

Other markets

Oil clawed back around a third of last night’s fall. Brent crude rose 83 US cents or 0.7 per cent to US$119.33 a barrel.

Gold trimmed a post-rate rise recovery. The yellow metal was lately up US$12.60 or 0.7 per cent at US$1,832.20 an ounce.

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