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Bank and real estate stocks propelled the market to a nine-week high amid tentative optimism about the economic outlook as Victoria’s COVID-19 infection rate continued to stabilise.
The S&P/ASX 200 surged for a second day, rising 63 points or 1 per cent. The index briefly touched 6186, its highest level since early June.
The market has been stuck in a holding pattern since the sharp initial recovery from the March pandemic slump topped out just shy of 6200 on June 9. This week brought renewed hopes of a breakout from two months of sideways drift as corporate earnings proved more resilient than expected and health experts forecast a fall in Victorian infections as nine days of toughened lockdown restrictions start to deliver results.
Victoria this morning reported 331 new cases, continuing the recent downward trend. Yesterday’s tally of 322 new cases was the lowest since July 29.
The economically-sensitive financial sector has lagged the broader market during the rebound amid fears of a wave of bad debts, but this morning led for a second day. The sector gained 2.1 per cent as Westpac climbed 3.2 per cent, NAB 2.9 per cent, CBA 2.6 per cent and ANZ 2.3 per cent. Commonwealth Bank and NAB are both scheduled to deliver earnings updates this week.
The materials and technology sectors were first to recoup their pandemic losses, but suffered differing fortunes this morning. While the materials sector marched to a nine-year peak, the tech sector slumped 1.8 per cent following overnight weakness in US sector leaders. Megaport fell 2.9 per cent, Appen 2.8 per cent and Afterpay 2.8 per cent.
Overnight , the Nasdaq eased 0.39 per cent as US investors rotated out of growth stocks into value plays more exposed to the economic cycle. The S&P 500 edged up 0.27 per cent and the Dow 1.3 per cent.
Strong Chinese demand for raw materials has fuelled the recovery in miners. Fortescue this morning advanced 2.2 per cent to a new peak. Rio Tinto put on 1.8 per cent and BHP 1.6 per cent. Gold stocks came under mild pressure. Perseus Mining slipped 4.4 per cent, Silver Lake Resources 3.6 per cent and industry heavyweight Newcrest 0.8 per cent.
Expectations for this earnings season have been set low after the coronavirus battered earnings across most sectors. Shopping centre operator SCA Property Group rose 2.9 per cent despite unveiling a 22 per cent dive in full-year statutory net profit after tax to $85.5 million. Stockland tacked on 4.6 per cent, Vicinity Centres 4 per cent and Scentre Group 3.8 per cent.
Investors in Challenger were less forgiving, sending the fund manager’s shares down 4.6 per cent to a three-and-a-half-month low after the company reported a 13 per cent drop in full-year net profit and cancelled its final dividend. Sydney Airport entered a trading halt to raise $2 billion in fresh capital after announcing a loss of $53.6 million after tax over the six months to June as passenger numbers plunged.
Business confidence deteriorated last month after a fleeting recovery in June. NAB’s monthly measure slumped to -14 from 0 the previous month as Victoria suffered a renewed coronavirus outbreak. A measure of conditions improved to 0 from -8 in July.
A strong morning on Asian markets saw China’s Shanghai Composite rise 0.7 per cent, Hong Kong’s Hang Seng 2.4 per cent and Japan’s Nikkei 1.8 per cent. S&P 500 index futures were recently ahead eight points or 0.2 per cent.
Oil extended overnight gains. Brent crude rallied 17 cents or 0.4 per cent to $US45.16 a barrel. Gold faded $11.90 or 0.6 per cent to $US2,027.90 an ounce.
The dollar rose 0.36 per cent to 71.75 US cents.
What’s hot today and what’s not:
Hot today: Shares in Traffic Technologies (ASX:TTI) briefly doubled in value after the public lighting specialist won a three-year contract to supply LED streetlights to Ausgrid in New South Wales. Ausgrid is responsible for approximately 260,000 street lights in Sydney, the Central Coast and the Hunter district. The three-year contract has an option for a further two years and is expected to require volumes of around 30,000 street lights, 30,000 road lights and 4,000 LED floodlights. The TTI share price spiked from 1.9 cents to 4 cents and was last trading at 2.9 cents, a gain of 52.6 per cent.
Not today: Marketing company IVE Group (ASX:IGL) sank to a three-month low on news supermarket Coles will scale back a weekly print catalogue that reached seven million Australian households a week. IVE, which printed and distributed the catalogue each week, expects a revenue hit of $35-40 million per annum from the supermarket’s decision to cease home delivery. Coles will continue to offer the catalogue in-store. IVE shares dropped 20.6 per cent to 63.5 cents.
