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The share market trimmed a losing quarter as a breakthrough in US debt limit negotiations boosted Wall Street futures.
The S&P/ASX 200 rebounded from two days of heavy selling, rising 94 points or 1.3 per cent. The rally slashed the index’s quarterly loss to 23 points or 0.3 per cent and its loss for September to 245 points or 3.3 per cent.
Iron ore producers, supermarkets and banks led the advance. Gold miners declined after the precious metal fell to its lowest since late March.
What’s driving the market
End-of-month/quarter window dressing and reports of a deal to avoid a US government shutdown overshadowed a contraction in Chinese factory activity and a dramatic jump in new Covid-19 cases in Victoria.
The market was ripe for a rebound following two days of heavy selling. The ASX 200 fell to its lowest in almost four months yesterday after diving 2.5 per cent in two brutal sessions. The last session of each month and quarter often see sharp moves as institutional investors re-jig their portfolios.
“The Australian share market seems set to close the September quarter on a promising note as it tries to revive from the losses from the two previous sessions,” Kalkine Group CEO Kunal Sawhney said. “The quarter-end dynamics seem to be weighing on investors’ minds, offering a helping hand to the share market.
“The quarter-end trade is usually tempting for fund managers, who ‘window dress’ the portfolio to boost the appearance of the fund’s performance at the end of each quarter. There is considerable historical evidence of portfolio pumping at the end of quarter, which potentially inflates the fund’s closing net asset value.”
All 11 sectors found support. Gains ranged from a slender 0.26 per cent rebound in the battered I.T. sector to 1.97 per cent for the defensive consumer staples sector.
US futures surged after Majority Leader Chuck Schumer announced the Senate had reached a deal to avoid a shutdown of the federal government. The stop-gap deal will fund government operations to December 3. Senators will vote tonight. S&P 500 futures firmed 20 points or 0.46 per cent.
Markets took in their stride news a measure of Chinese factory output contracted for the first time since February 2020. The CFLP manufacturing PMI dropped to 49.6 this month from 50.1 last month. Readings below 50 indicate declining activity. Caixin’s rival measure edged up to 50 from an August reading of 49.2.
Victoria reported a record 1,438 new Covid cases this morning after a day of record testing numbers. The state reported 950 cases the previous day.
US stocks steadied overnight but finished off session highs as jitters over inflation, long-term interest rates and the US federal debt limit persisted. The S&P 500 edged up 0.16 per cent. The Dow gained 0.26 per cent, while the Nasdaq dropped 0.24 per cent.
“Inflation concerns have returned in the markets following the Fed Chair’s latest prediction of current inflation pressures continuing into 2022. While the central bank still expects inflation to ease eventually, it is worried over little to no improvement in bottlenecks and supply chain problems,” Kalkine’s Mr Sawhney said.
Going up
The heavyweight miners led the charge after iron ore rose for the fifth time in six sessions. Rio Tinto gained 3.42 per cent and BHP 2.56 per cent.
Fortescue Metals overcame a mid-morning wobble after suspending operations at its Solomon Hub following a “significant incident” involving an employee this morning. An investigation was underway. The miner reached mid-session 3.24 per cent ahead.
Banks and supermarkets offered support as the yield on long-term bonds eased from three-month highs. Westpac jumped 2.94 per cent, Woolworths 2.3 per cent, ANZ 2.11 per cent, NAB 2.11 per cent, Coles 1.44 per cent and CBA 1.14 per cent.
Wesfarmers rose 0.75 per cent after its Bunnings subsidiary cleared a regulatory hurdle to purchasing specialist tile retailer Beaumont Tiles. The competition regulator, the ACCC, said it would not oppose the acquisition. The regulator said Bunnings was not a major player in tile sales and the acquisition would not significantly reduce competition.
A web browser deal with Microsoft lifted Z1p Co 1.15 per cent. The Australian company will integrate its buy now pay later offering into Microsoft’s Edge browser. The company said its digital payment option could launch on Edge in the US as soon as November.
South32 firmed 2.21 per cent after increasing its stake in Mozambique’s Mozal Aluminium to 72.1 per cent. The diversified miner will acquire Mitsubishi’s 25 per cent stake in the smelter for US$250 million. The purchase will increase South32’s share of aluminium production by 15 per cent.
Explosives manufacturer Orica jumped 14.53 per cent following a broker upgrade in the wake of yesterday’s well-received market update. The company said ammonium nitrate sales volumes had improved in the second half.
Going down
Gold stocks were the session’s biggest loser after a strengthening greenback dulled buying interest in alternative stores of wealth. Gold Road Resources declined 3.11 per cent, Northern Star 0.24 per cent and Newcrest 0.35 per cent.
Outside the gold space, the index’s biggest drags were Pinnacle Investments -2.33 per cent, Whitehaven Coal -1.68 per cent and Cochlear -1.21 per cent.
The tech sector was mixed in the wake of a fourth straight loss for the Nasdaq overnight. Afterpay eased 0.67 per cent. Altium gained 2.28 per cent, Appen 2.14 per cent and WiseTech 1.65 per cent.
Other markets
The ASX was something of an outlier during a generally negative session on Asian markets. The Asia Dow shed 0.14 per cent, Hong Kong’s Hang Seng 0.98 per cent and Japan’s Nikkei 0.4 per cent. China’s Shanghai Composite gained 0.43 per cent.
Oil drifted lower following the first decline in US crude stockpiles in eight weeks. Brent crude eased 23 US cents or 0.3 per cent to US$77.86 a barrel.
Gold rebounded US$9.20 or 0.53 per cent to US$1,732.10 an ounce.
The dollar bounced 0.3 per cent to 72 US cents.
