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The share market rebounded from a five-week low as a broad rally lifted all sectors and the Reserve Bank warned rates may have to rise faster and sooner to contain inflation.
The S&P/ASX 200 climbed 74 points or 1.07 per cent towards its first gain in four sessions. The benchmark regained the 7000 level at 7058 after closing yesterday at 6980, the weakest finish since the end of January.
Tech and consumer stocks led the advance. Afterpay parent Block, pokie-maker Aristocrat Leisure and Telstra were the pick of the majors.
What’s driving the market
Investors waiting to “buy the dip” stepped in after a three-day slide knocked the ASX 200 down 2.4 per cent. The market-leading energy sector and gold mining sub-sector continued to advance after crude closed at a 14-year high and gold neared a record. Banks and battered tech stocks also attracted a bid.
Buyers shrugged off a negative end to a volatile night on Wall Street and the threat of higher interest rates before the end of the year. Reserve Bank Governor Philip Lowe this morning acknowledged the central bank’s target rate may need to rise this year as the Ukraine war stokes inflationary pressures.
“The war in Ukraine and the sanctions against Russia have created a new supply shock that is pushing prices up, especially for commodities. This new supply shock will extend the period of inflation being above central banks’ targets,” he told a Sydney business summit.
“It is plausible that the cash rate will be increased later this year,” he added.
Lowe indicated the central bank remained in no rush to increase the cash rate, preferring to watch and wait.
“I recognise that there is a risk to waiting too long, especially in a world with overlapping supply shocks and a high headline inflation rate. But there is also a risk of moving too early,” he said.
“Australia has the opportunity to secure a lower rate of unemployment than has been the case for some decades. Moving too early could put this at risk.”
US stocks seesawed violently overnight after President Joe Biden announced a ban on Russian energy imports. The Dow finished 185 points or 0.56 per cent lower after rising as much as 585 points. The S&P 500 shed 0.72 per cent.
“Crazy moves in the commodity market continued as the US and Britain cut off Russian crude oil imports, which sent global oil prices further higher,” Kalkine Group CEO Kunal Sawhney said. “The oil market is boiling hot amidst aggravating geopolitical tensions on concerns around supply disruptions in the global energy market.
“Meanwhile, a host of other commodities, including aluminium, natural gas, nickel, gold, and wheat, are experiencing wild price swings in the commodity melt-up.”
Back home, consumer confidence soured this month as flooding and the Ukraine war sapped optimism about the future. The Westpac-Melbourne Institute index of consumer sentiment fell 4.2 per cent to 96.6 from 100.8 last month.
“This is the weakest print since September 2020, which is also the last time the index was below the 100-level indicating that pessimists outnumber optimists,” Westpac chief economist Bill Evans said.
Going up
Uranium miners continued to recover from last week’s fire scare at a Ukrainian power plant. Paladin Energy climbed 10 per cent, Elevate Uranium 17.43 per cent and Boss Energy 12.78 per cent.
Energy stocks struggled to hold early gains even as crude found fresh support in the US and UK’s Russian energy embargoes. Woodside Petroleum firmed 1.39 per cent. Beach Energy trimmed its gain to 0.44 per cent. Santos dipped 0.13 per cent.
Gold Road Resources climbed 6.85 per cent to a 19-month high after gold drew within US$12 of a record overnight. Perseus gained 2.27 per cent and Newcrest 0.36 per cent.
Aristocrat Leisure bounced 3.81 per cent after dousing worries about the impact of the Ukraine crisis on its eastern European operations. The gaming machine manufacturer said it did not anticipate a “material impact on earnings”. The company said it had suspended its Russian mobile games and helped Ukrainian employees relocate.
Other heavyweight gains included Block +6.17 per cent, Telstra +2.63 per cent and CBA +2.11 per cent.
Origin Energy firmed 1.38 per cent on news it will buy back up to $250 million of its shares on-market.
Insurer IAG held steady after reporting it expected net claims from flooding and storm damage on the east coast to be lower than previously estimated. The insurer said it had received 24,000 claims.
Going down
Nickel Mines plunged for a second day amid speculation a major shareholder may be selling to cover losses on the nickel market. Shares that traded as high as $1.79 yesterday hit $1.135 this morning. The miner’s share price was down 22.71 per cent at $1.14 before trading was paused pending an announcement.
The London Metal Exchange (LME) suspended trade in nickel overnight as prices briefly doubled and China’s Tsingshan Holding Group scrambled to cover short positions. The Chinese group reportedly faced a US$8 billion paper loss after nickel prices exploded.
Tsingshan held an 18.7 per cent stake in Nickel Mines, making it the miner’s largest investor. The nickel trading halt was expected to remain until at least Friday while the exchange introduced new rules to impose order on an unruly market.
Gold miner Aurelia Metals dropped 5.85 per cent after flooding halted production at the Dargues mine in southern NSW. The miner said record rainfall had impacted the underground mine and a tailings storage facility.
Other markets
US futures rallied with Asian markets. S&P 500 futures jumped 20 points or 0.49 per cent.
In Asia, the Asia Dow rebounded 0.9 per cent, China’s Shanghai Composite 0.31 per cent, Hong Kong’s Hang Seng 0.26 per cent and Japan’s Nikkei 0.56 per cent.
Oil pushed back above US$130 a barrel. Brent crude climbed US$2.17 or 1.7 per cent to US$130.15.
Gold rallied US$5.10 or 0.25 per cent to US$2,048.40 an ounce.
The dollar bounced 0.17 per cent to 72.79 US cents.
