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A rebound in iron ore producers from multi-week lows helped steer the ASX towards a second straight advance.

The S&P/ASX 200 rallied 15 points or 0.2 per cent by mid-session. Declines in the big four banks and travel stocks were outweighed by recoveries in BHP and Rio Tinto, plus gains in bond surrogates.

What’s driving the market

The big three iron ore producers plumbed multi-week lows yesterday after tightening environmental protections in China’s main steel-producing region drove ore prices to six-week lows. An editorial in Chinese government mouthpiece The Global Times implied ore was the latest pawn in the Communist Party’s persecution of Australian trading interests.

“This downward pressure on iron ore may serve as a heavy blow on Australia, the world’s largest exporter of iron ore, which has been smug when it comes to the ‘irreplaceability’ of iron ore supplies to China,” the opinion piece said. “China’s declining steel production for environmental protection purposes as well as efforts to promote the scrap reutilization will likely lead to a drop in demand for iron ore, which in turn will result in a slump in global iron ore prices,” the article added. 

This morning Rio Tinto and Fortescue Metals rebounded from their weakest closes since early December, rising 0.1 and 1.1 per cent, respectively. BHP rallied 1.4 per cent.

The wider market was bolstered by a positive night on Wall Street as long-term bond yields continued to ease. Tech stocks led the advance, lifting the Nasdaq Composite 1.23 per cent and the S&P 500 0.7 per cent. The Dow edged up 0.32 per cent as value stocks underperformed.

The pattern was similar here: tech and bond surrogates up, banks and travel stocks down. Brambles, Goodman Group and Telstra were the pick of the index heavyweights, rising between 1.9 and 3.9 per cent.

Going up

Utilities, telecommunications, healthcare and REITs – low-risk assets that attract investment flows when returns on bonds weaken – were the best of the sectors. AGL Energy climbed 5.8 per cent, Sonic Healthcare 3.7 per cent, ResMed 3.7 per cent and Goodman Group 1.9 per cent. CSL added 0.3 per cent. The Australian ten-year yield declined three basis points this morning before moderating its fall.

Xero climbed 2.1 per cent to its highest level in three weeks as the tech sector continued to heal from the ‘bond shock’ that knocked the high-flying sector down almost 25 per cent in a month. Appen gained 2 per cent and Nuix 0.6 per cent. Afterpay faded 0.1 per cent.

Telstra advanced for the seventh time in eight sessions, rising 1.9 per cent. The telecommunications giant yesterday announced plans to revise its corporate structure to unlock value. Other notable gains at the top end of the market included Brambles +3.8 per cent, Transurban +1.1 per cent, Coles +1 per cent and Woolworths +0.5 per cent.

Pharmaceutical supplier Sigma Healthcare jumped 4.9 per cent after beating full-year earnings guidance. Underlying earnings increased by 39.2 per cent to $81.1 million.

Strong sales at its Rip Curl surf stores helped Kathmandu resume dividend payments. Shares in the adventure sport retailer surged 9.7 per cent after the company announced a 12.9 per cent bump in half-year sales and a 19 per cent increase in underlying earnings.

Newly-listed Airtasker almost doubled in value upon debut before trimming its gains. Shares in the services platform that listed at 65 cents hit $1.16 before easing to $1, a gain of 53.9 per cent.

Coalminer New Hope inched up 1.5 per cent after scraping out a half-year pre-tax net profit of $900,000. A rebound in coal prices helped offset a decline in production. Rival Whitehaven Coal was flat as strong production at Maules Creek partly offset the impact of flooding in NSW.

Going down

Travel and tourism stocks mirrored US declines after fresh lockdowns in Europe dented optimism about the outlook for international travel. Flight Centre sank 3.2 per cent, Corporate Travel Management 3 per cent, Webjet 2.1 per cent and Qantas 1.7 per cent.

The banks were the biggest drags on the index. ANZ and Westpac shed 0.7 per cent, NAB 0.5 per cent and CBA 0.1 per cent. Woodside Petroleum dipped 0.7 per cent and Aristocrat Leisure 0.6 per cent.

Some of the heat came out of yesterday’s rally in gaming stocks a day after Blackstone floated a takeover offer for Crown Resorts. Star Entertainment eased 1.1 per cent, Crown 1.8 per cent and SkyCity 0.9 per cent.

Other markets

A cautiously positive morning on Asian markets saw the Asia Dow rise 0.12 per cent, China’s Shanghai Composite 0.06 per cent, Hong Kong’s Hang Seng 0.42 per cent and Japan’s Nikkei 0.63 per cent.

US futures were broadly neutral. S&P 500 futures inched up half a point or less than 0.1 per cent. Nasdaq futures ticked down 0.2 per cent.

Brent crude declined 54 cents or 0.8 per cent to US$64.08 a barrel. Gold fell $4 or 0.2 per cent to US$1,734.10 an ounce.

The dollar faded 0.25 per cent to 77.25 US cents.

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