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The share market hit its highest level of the week following a record close on the Dow and a post-earnings rally in travel stocks.

The S&P/ASX 200 climbed 64 points or 0.94 per cent by mid-session. Energy, mining and health stocks led the advance. The battered travel and tourism sector rallied following earning updates from Qantas and Flight Centre.

What’s driving the market

Market jitters diminished overnight after the US Federal Reserve played down fears of near-term policy changes to contain rising inflation. Fed Chair Jerome Powell said inflation could take three years to reach the bank’s 2 per cent target.

“Stock markets continue to recover on the buy the dip basis after US Federal Reserve Chair Jerome Powell mitigated market fears of any near or medium-term policy capitulation,” Stephen Innes, Chief Global Market Strategist at Axi, said.

The Dow jumped 1.35 per cent to a new high. The S&P 500 put on 1.14 per cent. The tech-heavy Nasdaq rose 0.99 per cent in a sign a recent rotation out of growth stocks into value sectors may be flagging.

“Tech could be due for a tactical bounce should bond yields stabilise or head lower,” Innes added.

The Australian tech sector gained 1 per cent, rising for the first time in five sessions after hitting a six-week low yesterday.

Travel stocks have been among the slowest to recover from the pandemic as border closures depressed activity. The sector enjoyed a strong morning as Qantas and Flight Centre talked up their recovery prospects while reporting eye-watering losses (more below).

Going up

Energy giant Woodside led a strong advance in the resources space, rising 3.2 per cent following a new 13-month high in crude overnight. BHP bounced 3 per cent back towards Tuesday’s record high. Fortescue Metals put on 1.8 per cent and Rio Tinto 1.7 per cent.

Elsewhere at the big end of the market, Woolworths gained 2.7 per cent, Telstra 1.6 per cent, CSL 1 per cent and Goodman Group 0.7 per cent. Gains in the big four banks ranged from 0.3 per cent for ANZ up to 1.2 per cent for NAB.

Qantas climbed 3.7 per cent as CEO Alan Joyce spruiked the improving outlook for a “redesigned” airline after reporting a $1.47 billion statutory pre-tax loss. Joyce described the figures as “stark” but unsurprising after border closures cut international travel by “virtually 100 per cent” and domestic flying by 70 per cent. The airline was planning for international travel to resume at the end of October as the vaccine rollout completes.

Flight Centre soared 7.4 per cent as the travel agent emphasised cost reductions and signs of recovery. The company reported an underlying pre-tax loss of $247.2 million for the half year. Rival Webjet put on 3.7 per cent.   

Surgical backlogs and latent demand are expected to fuel a recovery at Ramsay Health Care after a Covid-induced slump in profits. Statutory net profit declined 12.5 per cent last half as revenue fell 6.6 per cent. The share price bounced 6.6 per cent.

Bravura Solutions was the morning’s best tech performer, bouncing 7.8 per cent from a near three-year low after hitting its half-year guidance. The fintech’s share price has been under pressure as Covid lengthened the sales cycle.

Other companies to advance following earning updates included Sandfire Resources +9.5 per cent, Polynovo +4.1 per cent and Janus Henderson +3.7 per cent.

Going down

A2 Milk Company plunged 15.9 per cent to its lowest level since October 2018 after unveiling the impact of the collapse of its Chinese reseller market during the pandemic. Half-year revenues slumped 16 per cent and earnings 32.2 per cent as cross-border e-commerce dried up.

Service Stream provided the session’s other major loss, tumbling 18.9 per cent. The network maintenance firm reported a decline in telecom earnings after completing two-year agreements with Telstra and nbn.  

The buoyant market mood ensured heavyweight losses were minimal. Transurban eased 1.3 per cent following last night’s year high in US bond yields. Gold miner Newcrest slid 1.3 per cent. Aristocrat Leisure shed 1.1 per cent and Brambles 0.6 per cent.

Afterpay entered a trading halt while it tapped investors for $1.25 billion to increase its stake in its US operation. The BNPL leader more than doubled underlying sales over the first half to $9.8 billion. Earnings increased 521 per cent to $47.9 million.  Rival Z1P Co slumped 7.1 per cent despite reporting record revenue of $160 million and record transaction volumes.

Losses among companies trading without their dividends included Super Retail Group -4.5 per cent, JB Hi-Fi -3.9 per cent and Breville Group -1.8 per cent.

Other markets

Asian markets recouped most of yesterday’s falls. China’s Shanghai Composite bounced 0.88 per cent, Hong Kong’s Hang Seng 1.53 per cent and Japan’s Nikkei 1.66 per cent.

Rising US futures hinted at potential gains tonight. S&P 500 futures climbed six points or more than 0.1 per cent.

Oil extended a 13-month high. Brent crude advanced 19 cents or 0.3 per cent to $US66.37 a barrel. Gold rallied $4 or 0.2 per cent to $US1,801.90 an ounce.

The dollar logged a fresh three-year high this morning before retreating 0.13 per cent to 79.65 US cents.

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