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A revitalised ASX made a bright start to the new year after Wall Street finished at a record high and NSW reported no new locally-acquired Covid-19 cases.
The S&P/ASX 200 bounced 69 points or 1 per cent, reversing more than two-thirds of a 95-point dive on New Year’s Eve.
What’s driving the market
Positive leads from the US helped the local market shrug off weekend news of fresh virus restrictions in Greater Sydney. The ASX 200 recovered from its weakest close in a month as a broad rally lifted all sectors. Gains ranged from 0.3 per cent for energy stocks up to 1.4 per cent for consumer discretionary.
Wall Street finished 2020 at all-time highs amid optimism that increased vaccination this year will fuel economic recovery. The S&P 500 rose 0.64 per cent on New Year’s Eve to a record close. The Dow Jones Industrial Average climbed 0.65 per cent, also ending at a peak.
“The stock market is positioned for further gains in 2021 based on the twin pillars of coordinated fiscal and monetary policy from the US Treasury and the Federal Reserve Board and a successful Covid vaccine rollout,” Marc Chaikin, CEO of Chaikin Analytics, wrote. “However, we envision some bumps in the road on the way.”
US futures retreated on the eve of what is predicted to be a volatile week’s trading. Senate elections in Georgia tomorrow will determine the balance of power in Congress. The Electoral College assembles in state capitals the following day to confirm Joe Biden as the next president of the United States. S&P 500 futures declined four two points or 0.1 per cent.
“With the Georgia runoff elections on Tuesday and the electoral college drama on Wednesday, expect two-way trading this week and a pickup in short term volatility,” Chaikin added.
Back home, the market extended gains after NSW reported no new locally-acquired Covid-19 cases. Victoria recorded three cases. Mask wearing became mandatory in Greater Sydney from this week in most indoor public settings.
Going up
Miners set the pace at the top end of the market amid optimism about improving demand and recent commodity price hikes. Fortescue Metals climbed 3.5 per cent and gold miner Newcrest 3.2 per cent. BHP and Rio Tinto added 0.6 and 0.5 per cent, respectively. On the wider market, Evolution Mining added 4.5 per cent and Silver Lake Resources 4.4 per cent.
Yield stocks firmed as the local dollar extended last year’s gains. Goodman Group gained 2.1 per cent, Woolworths 1.7 per cent, Wesfarmers 1.7 per cent and Coles 1.6 per cent. The dollar rallied 0.7 per cent to 77.1 US cents.
The big four banks recovered from last week’s multi-week closing lows. ANZ and CBA bounced 1.6 per cent. NAB and Westpac added 1.3 per cent. Afterpay put on 1.8 per cent.
At the speculative end of the market, the S&P/ASX Emerging Companies Index of minnows climbed 1.4 per cent to a new record. The Small Ords, which has also outperformed the big end of town in recent months, gained 0.8 per cent.
Going down
Travel and entertainment stocks came under mild pressure as the Covid outbreak cast a long cloud. Corporate Travel Management shed 2.6 per cent, Auckland International Airport 1 per cent, SkyCity Entertainment 0.8 per cent and Sydney Airport 0.8 per cent.
Other notable declines included Whitehaven Coal -1.5 per cent, Oil Search -1.4 per cent, Chorus -1.2 per cent and Fletcher Building -1.1 per cent.
Other markets
Gold galloped into the new year. Gold for February delivery surged $24 or 1.3 per cent to $US1,919.10 an ounce.
Oil added to NYE gains. Brent crude rose 12 cents or 0.3 per cent to $US51.92 a barrel.
The falling greenback continued to undercut Japan’s export-driven market. The Nikkei 225 sagged 1.2 per cent. China’s Shanghai Composite edged up 0.1 per cent. Hong Kong’s Hang Seng eased 0.5 per cent.
What’s hot today and what’s not
Hot today: Shares in explorer S2 Resources (ASX:S2R) rebounded sharply on news of drilling success in Finland. Assays from the Aarnivalkea prospect confirmed a second high-grade gold zone near an intercept reported last month. CEO Matthew Keane said drilling to date had “barely scratched the surface”. The fact two of four holes had struck high-grade gold 575 metres apart was “highly encouraging”. The share price jumped 38.5 per cent – relief for investors after the price halved last month on disappointing results from the Fraser Range.
Not today: Link Administration Holdings (ASX:LNK) slumped 14.1 per cent after US suitor SS&C Technology Holdings abandoned a takeover attempt. Link announced SS&C had withdrawn a conditional, non-binding proposal to acquire all the shares in the company for $5.65 each. The share price slid to $4.77. Link last year knocked back a lower offer from a US consortium of private equity firms. The company said it will consider alternative ways to maximise value for shareholders.
