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A strong rally in iron ore miners helped the share market defy weak leads and heavy selling among tech stocks.

The S&P/ASX 200 advanced 43 points or 0.6 per cent by mid-session. The rally lifted the index off a near three-week low and recouped all of yesterday’s loss.

Fortescue Metals, BHP and Rio Tinto hit multi-session highs following two days of solid gains in iron ore. Tech stocks tumbled as Australian borrowing costs increased.

What’s driving the market

Signs of improving demand for steel in China lit a fire under the share prices of bulk metal miners. Fortescue Metals flew up 7.59 per cent to a two-month high. BHP put on 4.32 per cent, Rio Tinto 3.52 per cent and Champion Iron 6.86 per cent.

Iron ore bounced off 18-month lows on Friday and added to gains yesterday. The spot price for ore landed at Tianjin firmed 3.7 per cent to US$94.70 a tonne. The rally was fuelled by a Mysteel report showing demand for steel products rose 4.2 per cent last week.

Ore prices had tumbled in recent months amid signs of stress in China’s property market. Confidence improved last week as Evergrande resumed work on stalled projects and another developer was able to raise capital.

“In the short term, the property-related policy is expected to see improvement, which could probably lift market sentiment,” Galaxy Futures wrote in a note quoted by Reuters.

Strength in the mining heavyweights helped paper over losses elsewhere. A sharply-divided market split mostly into winners and losers from a surge in borrowing costs. The yield on ten-year Australian government bonds jumped nine basis points this morning to 1.9 per cent in response to a US yield rally. Lenders rose. Growth stocks and most bond proxies declined.

The market took in its stride underwhelming leads from Wall Street. An exuberant initial reaction to the renomination of Jerome Powell as Federal Reserve Chair gave way to a late sell-off that pushed pre-market ASX futures into the red.

The Dow finished just 17 points or less than 0.1 per cent ahead after being up more than 300 points. The S&P 500 and Nasdaq Composite both closed lower after touching all-time highs.

Trading volumes are expected to decline this week as the US heads into Thanksgiving. Equity markets close on Thursday and only reopen for a half-session on Friday.

“It is Thanksgiving week, so the next few days will likely be extremely low volume and probably won’t have many fireworks,” Ryan Detrick, chief financial strategist at LPL Financial, told CNBC. “Still, Wednesday will bring the latest Fed minutes and the Fed’s favorite measure of inflation in the PCE, so we could have something to think about before we go off and eat a lot of turkey.”

Going up

Woodside jumped 3.09 per cent after finalising a deal to merge with BHP’s oil and gas business. Under the terms of the deal, Woodside will acquire all of the share capital of BHP Petroleum International in exchange for new Woodside shares. The energy giant also announced it had greenlit the Scarborough and Pluto Train 2 LNG developments in WA.

“Developing Scarborough delivers value for Woodside shareholders and significant long-term benefits locally and nationally, including thousands of jobs, taxation revenue and the supply of gas to export and domestic markets for decades to come,” CEO Meg O’Neill said.

CBA climbed 1.11 per cent off a six-month low on the promise of improved margins as borrowing costs rise. ANZ tacked on 1.72 per cent, NAB 0.66 per cent and Westpac 1.13 per cent.

The announcement of a share buyback lifted mortgage insurer Genworth 4.36 per cent. The company will buy back up to 11.1 per cent of its issued share capital up to a maximum aggregate value of $100 million.  

Link Group edged up 0.61 per cent after reaffirming full-year guidance of low single-digit growth. The administration services provider is fielding takeover proposals for all or part of the company from Carlyle Group and LC Financial Holdings.  

Investment manager Pinnacle entered a trading halt for a capital raise to fund the purchase of a 25 per cent stake in private-equity firm Five V Capital. Pinnacle said the Australian equity firm had a proven track record of investment excellence.

Going down

The rate-sensitive tech sector dived 3.7 per cent to a four-week low. Tech stocks are particularly vulnerable to rising borrowing costs because of the way analysts value their future earnings.

WiseTech skidded 6.61 per cent, Afterpay 6.04 per cent and EML Payments 4.34 per cent. Altium shed 3.74 per cent, NextDC 3.61 per cent and Megaport 3.59 per cent.

Technology One fell 2.94 per cent despite hitting the upper end of full-year profit guidance and increasing its dividend by 8 per cent. The software developer lifted profit before tax by 19 per cent to $97.8 million. The company predicted recurring revenues will grow at a minimum of 15 per cent per annum by FY24.

Gold stocks were the morning’s other major drag following the yellow metal’s biggest setback in three and a half months. Ramelius gave up 3.79 per cent, Silver Lake Resources 4.62 per cent and Newcrest 0.57 per cent.

Northern Star dipped 2.68 per cent after agreeing to acquire Newmont’s Australian power business for US$95 billion. The miner said the acquisition would reduce power costs at its Kalgoorlie gold operations.

Generic drugmaker Mayne Pharma sagged 2.42 per cent after CEO Scott Richards declined to offer a trading update at today’s AGM. Scott said year-to-date trading was “not reflective of the expectations we have for the remainder of this half and the rest of the financial year”. A “mixed” start to trading was expected to improve.

News of the departure of long-serving CEO and Managing Director Darryl Abotomey sent shares in automotive aftercare specialist Bapcor down 9.03 per cent. Abotomey headed the company for a decade, guiding it through its listing in 2014.   

Other markets

Another mixed session on Asian markets saw the Asia Dow ease 0.21 per cent and Hong Kong’s Hang Seng lost 0.87 per cent. China’s Shanghai Composite gained 0.3 per cent. Trade in Japan was suspended for a public holiday.

S&P 500 futures edged up four points or 0.1 per cent.

Brent crude faded 30 US cents or 0.4 per cent to US$79.40 a barrel.

Gold rebounded US$4 or 0.2 per cent to US$1,810.30 an ounce.

The dollar bounced 0.12 per cent to 72.36 US cents.

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