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Resource stocks led a sharp rebound from a four-week share market low as gains on Wall Street and commodity markets overshadowed confirmation the economy slid into deep recession last quarter.
The S&P/ASX 200 bounced 95 points or 1.6 per cent, reversing most of yesterday’s fall and reclaiming the 6000 level at 6045.
The rally followed record closes on the S&P 500 and Nasdaq overnight and advances in iron ore, oil and most metals.
What’s driving the market
A forward-looking market shrugged off news gross domestic product contracted a shocking 7 per cent last quarter as lockdown restrictions strangled the economy. The drop – the second straight quarterly decline following a 0.3 per cent contraction at the start of the year – confirmed the economy was officially in recession for the first time since 1991. The 7 per cent contraction was slightly worse than the 6 per cent fall anticipated by economists.
Exporters drew relief from a retreat in the dollar from two-year highs following the news. The Aussie eased 0.36 per cent to 73.5 US cents after peaking above 74 US cents yesterday.
The materials sector surged 1.9 per cent after US miners helped lift the S&P 500 0.75 per cent to an all-time high. Raw resources rallied following unexpectedly strong factory data from China, Europe and the US. Here, Fortescue Metals climbed 3.5 per cent, BHP 3 per cent and Rio Tinto 1.9 per cent.
Going up
A broad rally lifted all 11 sectors as bargain-hunters swooped on four-week lows. While miners set the early pace, telecoms, utilities, industrials and consumer staples all gained at least 2 per cent.
Nickel miner Western Areas rose 5.7 per cent after releasing the maiden ore reserve for the AM6 deposit at its Cosmos mine in WA. Troubled wealth manager AMP climbed 6.7 per cent on news the company will review its assets and businesses following interest from potential buyers.
United Malt Group, which was spun out of Graincorp, rose 6.5 per cent after announcing plans to upgrade the kiln at its Perth malting plant.
Going down
The buy now pay later group of companies fell heavily for a second session a day after PayPal announced it would enter the sector by offering interest-free payments in four instalments in the US. Z1P Co skidded 7.8 per cent, Splitit 6.1 per cent, Sezzle 4.2 per cent and Afterpay 0.9 per cent. PayPal shares climbed 2.3 per cent overnight in the US.
Recovery plays – companies most leveraged to a revival in the economy – continued to underperform. Flight Centre dipped 3.7 per cent, Webjet 1.7 per cent, Credit Corp 1.2 per cent and G8 Education 0.8 per cent.
Gold stocks retreated after the yellow metal failed to hold the US$2,000 level overnight. Northern Star dipped 2.3 per cent, Saracen Mineral 2 per cent and Newcrest 1.6 per cent. Gold was lately off $6.80 or 0.3 per cent at $US1,972.10 an ounce.
Other markets
US index futures rallied despite further evidence of a continuing deadlock over a new coronavirus relief package. Democrat House Speaker Nancy Pelosi this morning accused the White House of refusing to compromise following a phone call with Treasury Secretary Steven Mnuchin. S&P 500 index futures climbed seven points or 0.2 per cent.
A mixed morning on Asian markets saw China’s Shanghai Composite ease 0.3 per cent, Hong Kong’s Hang Seng down 0.4 per cent and Japan’s Nikkei up 0.4 per cent.
Oil extended its first rise in four sessions. Brent crude advanced 38 cents or 0.8 per cent this morning to $US45.96 a barrel.
What’s hot today and what’s not:
Hot today: Shares in King Island Scheelite (ASX:KIS) almost tripled on news the Tasmanian miner had secured an off-take agreement for the tungsten concentrate from its Dolphin mine on King Island. A subsidiary of commodity trading giant Noble Group will take 1,500 tonnes per annum, roughly half the mine’s expected annual production. Shares in King Island surged from 5.5 cents to 14 cents before halving their gains to 9.4 cents, a rise of 70.9 per cent.
Not today: Investment manager IOOF Holdings (ASX:IFL) slumped 13.9 per cent after raising $734 million from institutions at a sharp discount. The share price tumbled to $3.67 following the raising at $3.50. The funds will be used in part to complete the acquisition of NAB’s MLC wealth management business.
