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Aussie shares reversed yesterday’s falls as mining stocks forged higher and data showed the economy was recovering faster than expected.

The S&P/ASX 200 climbed 36 points or 0.5 per cent by mid-session. Gains in miners, banks and industrials outweighed declines in tech and health stocks.

The dollar put on a tenth of a cent on news the economy expanded by 3.1 per cent last quarter. The Aussie was last up 0.12 per cent at 78.33 US cents.  

What’s driving the market

The ASX shrugged off a soft night on Wall Street, encouraged by strength in US miners. While the broader US market declined, the materials sector rallied 0.6 per cent in anticipation of upward pricing pressure on raw materials as the global recovery expands.

“Soaring commodity prices are giving a leg up to the metal and mining sector amid pent-up demand,” Kalkine Group CEO Kunal Sawhney said.

Local action mirrored an on-going US rotation out of tech stocks into cyclicals. The tech-heavy Nasdaq Composite skidded 1.69 per cent overnight. The broader S&P 500 eased 0.81 per cent and the cyclical-weighted Dow 0.46 per cent.

Global equity markets have come under pressure in recent weeks as rapid gains in bond yields raised questions over how long this era of easy money can continue before policymakers turn off the spigots. The Reserve Bank yesterday reassured investors it does not expect to raise the cash rate until at least 2024.

“The market direction from here on clearly depends on how central banks are able to convince market players that the pick-up in growth shall not put a brake on loose monetary policy,” Sawhney said. “The market was heartened to see the RBA’s commitment to maintaining highly supportive monetary conditions until inflation and employment targets are achieved… If the US can add further fiscal stimulus while keeping inflation near target levels and maintaining easy monetary policy, market volatility can be curtailed in a disciplined fashion.”

The market got a mid-morning boost from news GDP jumped 3.1 per cent in the December quarter, well ahead of the 2.5 per cent anticipated by economists. The result meant the economy shrank 1.1 per cent year on year, versus the 1.8 per cent expected. The quarterly gain followed a 3.4 per cent surge in the September quarter and marked the first time in the 60-year history of the reports of back-to-back increases of more than 3 per cent.

Going up

The big four miners sat squarely atop the list of heavyweight risers. Fortescue Metals climbed 4.2 per cent, BHP 2.7 per cent, Newcrest 1.9 per cent and Rio Tinto 1.6 per cent. BHP eked out a new record high. Rio Tinto’s advance came despite news chairman Simon Thompson will stand down at next year’s AGM. Both companies are due to pay out record dividends this week.

Gold stocks seized on the yellow metal’s first advance in six sessions. Ramelius Resources bounced 10.4 per cent, Gold Road Resources 4.8 per cent and Westgold 5.6 per cent.

Rare earths miner Lynas rallied 4.2 per cent to an all-time high. Diversified miner South32 neared a 13-month peak with a rise of 3.8 per cent. Fertiliser and crop protection specialist Nufarm climbed 6.3 per cent to its highest level since June.

Gains in the banks were more moderate. ANZ put on 1.6 per cent, NAB 1.4 per cent, Westpac 1.3 per cent and CBA 0.8 per cent. Wesfarmers added 1.2 per cent, Transurban 0.5 per cent and Telstra 0.3 per cent.

Media group Nine Entertainment rose 0.3 per cent to just shy of yesterday’s record high following the announcement of a new CEO. Mike Sneesby, currently chief executive of Nine’s Stan streaming service, will replace Hugh Marks at the top of the parent company from the start of next month.

Going down

The technology sector fell back towards last week’s three-month lows following selling pressure on US tech overnight. The Nasdaq Composite lost 1.69 per cent, resuming a downtrend that pulled it 4.9 per cent lower last week. Growth stocks have wilted over the last few weeks amid fears rising bond yields might compel policymakers to wind back stimulus efforts.

“High flying tech shares are the first to buckle when droplets of concerns hit the ground from the foreboding gathering of policy thunderheads roiling above,” Stephen Innes, Chief Global Market Strategist at Axi, said. “Investors’ strategy is to get out of the soup and get as far away from high valuation flyers as they possibly can.”

Afterpay slumped 3.1 per cent. The domestic tech sector leader has lost almost a quarter of its value in two weeks. Megaport shed 4 per cent, Xero 2.6 per cent, Nearmap 2.6 per cent and Appen 2.1 per cent.  

Away from tech, heavyweight drags included CSL -0.8 per cent, Goodman Group -0.4 per cent, Woolworths -0.3 per cent and Brambles -0.1 per cent.

Among stocks going ex-dividend, Orora fell 3.3 per cent, Bravura Solutions 2.5 per cent, Treasury Wine Estates 1.6 per cent, IOOF 1.4 per cent and Medibank Private 0.1 per cent.  

Other markets

Asian markets were mixed but broadly higher following yesterday’s sell-off. The Asia Dow put on 0.64 per cent. Hong Kong’s Hang Seng advanced 0.53 per cent. China’s Shanghai Composite declined 0.24 per cent and Japan’s Nikkei 0.13 per cent.

US futures firmed. S&P 500 futures rose five points or more than 0.1 per cent.

A tough week for oil investors continued as traders continued to reduce their exposure ahead of tomorrow night’s OPEC+ meeting. Brent crude fell 12 cents or 0.2 per cent to $US62.58 a barrel.

Gold pared an overnight bounce, its first rally in six sessions. The yellow metal faded $3 or 0.2 per cent to $US1,729.90 an ounce.

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