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Aussie shares pushed for a third straight advance for the first time in a month as gains in commodity stocks offset weakness in tech and healthcare.

The S&P/ASX 200 rallied 14 points or 0.2 per cent by mid-session.

Rebounds in iron ore, metals and oil helped lift the energy and materials sectors. Tech stocks trimmed two days of gains after the Nasdaq Composite fell overnight.

What’s driving the market

Strength in commodities helped the ASX extend this week’s relief rally despite a mixed finish on Wall Street. News that Shanghai will reopen this month overshadowed yesterday’s weak Chinese economic data.

Iron ore climbed 3.9 per cent on the Dalian Commodity Exchange. Brent crude put on 2.4 per cent. Copper added 0.8 per cent.

“Most metals rallied after the PBOC [People’s Bank of China] cut interest rates on new mortgages. The news of a second day of no COVID-19 cases outside of quarantine also lifted hopes that restrictions may be eased in Shanghai,” ANZ senior commodity strategist Daniel Hynes said.

“Iron ore futures edged higher, on prospects of stronger demand from the housing market. Increased infrastructure investment is also expected.”

US stocks continued to swing wildly in overnight trade. The S&P 500 faded to a loss of 0.39 per cent. The Dow held onto a gain of 0.08 per cent. The Nasdaq slid 1.2 per cent.

The big question confronting equity markets is the likelihood of a recession as central banks hike rates rapidly to curb inflation. The prospect of a “hard landing” in the US has dragged the Nasdaq into a bear market and the S&P 500 and Dow into technical corrections.

JP Morgan Chase’s closely-followed strategist Marko Kolanovic told clients equities had over-priced the risk of recession relative to other markets. Kolanovic said US and European share markets appeared to be pricing in a 70 per cent chance of recession, versus just 20 per cent in rate markets.

“Either equity markets prove right and a recession takes place, inducing much bigger declines in bond yields, or rate markets prove right and a recession is avoided, inducing a recovery in equity markets,” Kolanovic wrote. “Our view remains that the probability of a recession over the next 6-12 months is low and thus stay with a pro risk stance.”

The minutes from this month’s Reserve Bank meeting showed the bank considered raising the cash rate target by 40 basis points before opting for an increase of 25 basis points to 0.35 per cent.

Inflation is expected to increase in the near term before falling back within the bank’s 2-3 per cent target range by mid-2024. The bank’s forecast is based on the cash rate reaching 1.75 per cent by year-end and 2.5 per cent next year.

Consumer confidence fell for a fourth straight week as the cost of living continued to weigh. The ANZ-Roy Morgan index fell 1.3 per cent to its lowest level since August 2020.

Going up

China-facing businesses rebounded on news Shanghai will slowly reopen this month. Mineral Resources gained 5.42 per cent. Whitehaven Coal put on 5.3 per cent, Lynas Rare Earths 5.03 per cent and Chalice Mining 4.04 per cent.

At the heavyweight end, Fortescue Metals rose 2.37 per cent, Rio Tinto 1.77 per cent and BHP 0.67 per cent. Energy giants Santos and Woodside put on 1.73 and 1.31 per cent, respectively.

Pilbara Minerals firmed 4.23 per cent after winning a $20 million federal government grant to advance the chemicals facility at its Pilgangoora project. Nickel Mines edged up 1.94 per cent after signing a binding term sheet for solar power supply to its Hengjaya mine.

Perseus Mining firmed 2.65 per cent on news shareholders in Canadian target Orca Gold voted in favour of the acquisition. The completion of the acquisition is still subject to court and TSX approval.

Double-digit full-year revenue growth helped lift forex specialist OFX Group 8.87 per cent to an all-time high. Underlying earnings jumped 53.1 per cent to $44.5 million. Turnover increased 32.7 per cent to $33.2 billion.

Havilah Resources jumped 79.41 per cent on news OZ Minerals has its eyes on the copper explorer’s Kalkaroo project in South Australia. The companies signed a conditional binding terms sheet giving OZL the option to acquire the project after a period of evaluation. OZL shares climbed 1.58 per cent.

Going down

Brambles fell 7.93 per cent from an eight-month high on news potential suitor CVC Capital had walked away. The European private-equity firm advised Brambles it would not put forward a formal proposal to acquire the Australian company or conduct detailed due diligence. CVC blamed “current market volatility” for its decision.

“The Board will continue to explore other options for the Company that maximise shareholder value,” Brambles said in a statement.

James Hardie dipped 3.22 per cent after reaffirming full-year guidance of US$740-US$820 million. The fiber cement manufacturer’s global sales increased by 20 per cent over the fourth quarter.  

Investors booked profits in some of the index’s best performers since Friday. Life360 declined 4.96 per cent, Block 3.65 per cent and Goodman Group 3.38 per cent. Seek shed 3.86 per cent, REA Group 3.78 per cent and Megaport 3.19 per cent.

United Malt Group dipped 1.62 per cent after confirming half-year earnings slipped 5 per cent, in line with revised guidance. Improved prices were offset by the impact of drought in Canada, supply-chain issues and inflation.

Disruptions from wet weather and Covid labour issues prompted drilling services provider Mitchell Services to slash its earnings outlook. The share price slumped 15.94 per cent on news the firm now expected full-year earnings of $31-$35 million, down from previous guidance of $40-$44 million.

Other markets

The Asia Dow rose 0.92 per cent. Hong Kong’s Hang Seng added 1.46 per cent and Japan’s Nikkei 0.22 per cent. China’s Shanghai Composite was an outlier, falling 0.4 per cent.

S&P 500 futures improved nine points or 0.22 per cent.

Gold built on last night’s rebound gains, advancing US$12.10 or 0.67 per cent to US$1,826.10 an ounce.

Brent crude edged up 13 US cents or 0.1 per cent to US$114.37 a barrel.

The dollar firmed 0.4 per cent to 69.99 US cents.

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