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A strong rebound in iron ore and a six-month high in tech stocks powered the ASX towards a third straight advance.
The S&P/ASX 200 rallied 39 points in early action to its strongest level in more than a week before trimming its rise to 17 points or 0.23 per cent.
BHP, Rio Tinto and Fortescue Metal climbed with ore prices. A bumper result from WiseTech offset declines in Afterpay and Bravura Solutions. Beaten-up travel and tourism stocks rose as global growth worries continued to subside.
What’s driving the market
Record closes in the US and an on-going recovery in commodity prices supported a third day of gains. The S&P 500 and Nasdaq Composite closed at fresh highs as China’s success in containing the delta Covid-19 variant soothed fears of a slowdown in global growth. Chinese authorities yesterday reported zero new cases for the first time since July.
US treasury yields improved and travel stocks rallied. The S&P 500 edged up 0.15 per cent to its 50th record close of the year. The Nasdaq Composite put on 0.52 per cent as Chinese US-listed stocks recovered.
“While it is still far too early to be certain, the latest developments suggest that the COVID-19 outlook may be improving across countries,” Kalkine Group CEO Kunal Sawhney said. “A slew of positive developments has hit the market lately… These favourable events have bolstered expectations of a sooner recovery from the virus crisis, which has been posing uncertainty over the global economic outlook for more than a year now.
“At a time when the government support unveiled in 2020 has been largely withdrawn across most countries, betterment in the COVID-19 situation was much needed to ensure the sustenance of businesses in different sectors. This is especially true for the travel and tourism sector, which continues to bear the brunt of international border restrictions across countries.”
Travel and tourism stocks outperformed for a second day. Webjet rallied 6.46 per cent, Flight Centre 5.98 per cent, Qantas 4.98 per cent and Corporate Travel Management 3.98 per cent.
Iron ore belatedly joined this week’s recovery in raw materials. The spot price for ore landed in China bounced 9 per cent to US$148.60 a tonne. Fortescue Metals climbed 2.94 per cent further from Monday’s five-month low. Rio Tinto added 3.02 per cent and BHP 1.63 per cent.
June-quarter construction work fell short of estimates as lockdowns bit. Total construction increased a seasonally-adjusted 0.8 per cent, versus expected growth of 2.8 per cent.
“Residential activity a key miss,” tweeted the chief economist of IFM Investors, Alex Joiner. “Overall supports the narrative that Q2 real GDP will be soft and indeed risks being negative.”
Going up
WiseTech flew up 40 per cent to an all-time high after smashing earnings expectations. The logistics software specialist reported full-year revenue of $507.5 million as its CargoWise product gained traction. Underlying net profit doubled to $105.8 million. Trade was halted at noon, pending another announcement.
Buy now pay later player Z1p Co firmed 1.37 per cent despite a full-year loss of $653 million. Revenue increased 150 per cent to $403 million.
SkyCity rallied 3.85 per cent as investors bet on a rebound in earnings this year when its casino in Auckland emerges from lockdown. Full-year net profit sank 33.7 per cent to NZ$156.1 million. Revenues declined 15.4 per cent to NZ$951.9 million.
A busy session for earnings also included well-received updates from Ridley +8.77 per cent, IDP Education +0.73 per cent and Medibank Private +0.14 per cent.
Bravura Solutions dived 16.22 per cent, Worley 2.91 per cent, Iluka 4.19 per cent, Orocobre 0.87 per cent, Northern Star 0.41 per cent and Mydeal.com.au 7.14 per cent.
Going down
Takeover target Afterpay eased 0.95 per cent as revenue growth fell short of expectations. While full-year underlying sales jumped 90 per cent, revenue of $924.7 million missed the analysts’ consensus by around $16 million. The buy now pay later leader declared a statutory loss of $159.4 million.
Nine Entertainment slipped 10.07 per cent after warning of increased costs in the year ahead. The media group swung to a full-year net profit of $184 million on revenues of $2.3 billion.
An announcement Kerry Stokes will stand down as chair of Seven Group took some of the shine off a 440 per cent surge in full-year net profit. Terry Davis will replace Stokes at the conclusion of the November AGM. Seven’s statutory net profit rose to $634.6 million from $117.5 million in FY20 amid a revival of mining and infrastructure activity. Shares in the firm eased 6.29 per cent.
A profit hit from impairment charges and finance costs helped pull APA Group down 2.61 per cent. The gas infrastructure firm’s reported full-year profit shrank to $3.7 million from $311 million in FY20 as it wrote down a Victorian gas plant. Revenue increased 0.7 per cent to $2.144 billion.
An increase in costs and doubts over second-half earnings overshadowed a 94.5 per cent improvement in first-half net profit at cement manufacturer Adbri. The company will spend around $200 million on its Kwinana and Accolade projects. The traditional seasonal bump in second-half earnings will be impacted by reduced lime volumes to Alcoa, the launch of a rival cement import terminal and the effects of Covid-19. The share price dipped 6.16 per cent.
Companies going ex-dividend included AGL -4.04 per cent, Telstra -2.67 per cent and Tabcorp -1.72 per cent. Downer EDI improved 0.46 per cent.
Other markets
US futures retreated as Asian markets traded mixed. The Asia Dow inched up 0.02 per cent and Japan’s Nikkei 0.06 per cent. China’s Shanghai Composite dropped 0.05 per cent and Hong Kong’s Hang Seng 0.36 per cent.
S&P 500 futures dipped three points or almost 0.1 per cent.
A two-session rebound in oil faltered. Brent crude fell 45 US cents or 0.63 per cent to US$70.60 a barrel.
Gold declined US$11.80 or 0.65 per cent to US$1,796.70 an ounce as the US dollar rallied.
The dollar eased 0.09 per cent to 72.42 US cents.
