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The share market charged towards its first weekly advance in a month after US politicians voted to raise the debt ceiling, averting a damaging default.
The S&P/ASX 200 rallied 58 points or 0.8 per cent towards its third gain of a choppy week. The advance extended the benchmark’s tally for this week beyond 120 points.
Mining and tech stocks led the push, offsetting a mixed morning for banks and defensive stocks. Macquarie Bank hit an all-time high. EML Payments slumped on regulatory problems in Europe.
What’s driving the market
This morning’s gains came as the US Senate voted to raise the federal government debt limit by US$480 billion and Chinese markets reopened higher after a week-long holiday. Ten Republicans voted with the Democrats to ensure the bill passed by 50 votes to 48. The House of Representatives will vote next week. The new limit will allow the government to meet its liabilities until approximately December 3.
US stocks rallied overnight after the Republican Senate leadership agreed to support the stop-gap solution. The S&P 500 gained 0.83 per cent and the Dow 0.98 per cent.
“This is essentially a kicking can exercise, but hopefully it allows for a resolution to the infrastructure and social spending plan, before a new debt ceiling agreement takes place,” NAB currency strategist Rodrigo Catril said.
US futures edged higher. S&P 500 futures climbed nine points or 0.2 per cent.
China’s Shanghai Composite resumed trade following Golden Week with a rise of 1.15 per cent. Hong Kong’s Hang Seng climbed 1.47 per cent and Japan’s Nikkei 2.06 per cent. The Asia Dow gained 1.34 per cent.
Buying interest has been depressed this week by fears of a second “taper tantrum” if tonight’s September US jobs report proves strong enough for the Federal Reserve to start to reduce support for the economy. While the central bank has given the market plenty of warning, investors are still scarred by the 2013 market convulsion when the Fed announced plans to unwind emergency measures introduced during the Great Financial Crisis. Treasury yields surged. Equity markets fell for weeks before stabilising.
Overnight, a sharp drop in claims for jobless benefits sharpened expectations for a strong reading tonight. Private payrolls data on Wednesday also came in stronger than economists expected.
“US jobless claims marked their first drop in four weeks, indicating the economy’s steady recovery from the coronavirus recession,” Kalkine Group CEO Kunal Sawhney said. “The latest data has further strengthened the argument that the COVID-19 Delta variant was temporarily disrupting a revival in jobs.
“All eyes are now glued to the monthly jobs report for September, due tonight, which would provide further clarity on the state of jobs market amid the coronavirus situation.”
The market was largely unmoved by a four-month high in long-term interest rates. The yield on ten-year Australian government bonds climbed five basis points to 1.647 per cent, a level last seen in early June.
Going up
Mining stocks rallied as China reopened for business. Rio Tinto climbed 3.98 per cent, BHP 3 per cent and Fortescue Metals 2.41 per cent. A positive night for industrial metals helped Chalice Mining firm 4.11 per cent, Nickel Mines 3.87 per cent and OZ Minerals 3.7 per cent.
Macquarie Bank hit an all-time high at $183.71 before trimming its rise to 0.81 per cent at $182.16. Magellan Financial Group bounced 5.33 per cent from an 18-month low.
The big four high-street banks were mixed. NAB advanced 0.73 per cent. CBA lifted 0.54. cent towards its first gain since a broker downgrade on Wednesday. ANZ added 0.07 per cent. Westpac shed 0.15 per cent.
Woolworths rose 1.34 per cent to its highest in almost a month after provisionally settling a class action relating to underpayment of staff. The supermarket will pay 20,000 current and former staff $2,500 each plus retirement benefits. The payments will proceed on the basis that legal proceedings are discontinued.
Tech heavyweight Afterpay fuelled a 1.3 per cent rise in the sector with a gain of 2.79 per cent. Xero added 1.07 per cent and Appen 1.37 per cent.
Going down
EML Payments slumped 13.78 per cent after Ireland’s financial regulator proposed business limits that would “materially impact” the payment platform’s European operations. The Central Bank of Ireland advised EML’s Irish subsidiary that its “material growth policy” was higher than the regulator wants. The regulator previously raised concerns about EML’s risk and control frameworks and governance in relation to anti-money laundering and counter terrorism financing.
IGA operator Metcash dipped 0.74 per cent on news Group CEO Jeff Adams will retire. Adams will be succeeded by Doug Jones, currently CEO and Senior Vice President of South Africa’s Massmart Wholesale.
Uranium miner Energy Resources dropped 5.41 per cent after warning additional costs to rehabilitate its Ranger mine in the Northern Territory will be “material”. The miner previously warned of cost and schedule overruns.
Bond proxies were mixed in the wake of a sharp rise in yields. Transurban declined 1.36 per cent, Goodman Group 0.23 per cent and Coles 0.26 per cent. Wesfarmers put on 1.6 per cent, Woolworths 1.28 per cent and CSL 1.04 per cent.
Other markets
Oil added to last night’s 0.5 per cent rebound. Brent crude lifted 72 US cents or 0.88 per cent to US$82.62 a barrel.
Gold eased 60 US cents or 0.03 per cent to US$1,758.60 an ounce.
The dollar inched up 0.05 per cent to 73.2 US cents.
