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Energy stocks helped propel the ASX higher as in-fighting within the Organization of the Petroleum Exporting Countries (OPEC) threatened expected production increases in crude oil.

The S&P/ASX 200 rallied 28 points or 0.4 per cent by mid-session.

Woodside Petroleum and Santos advanced as oil traded near its highest level since October 2018.

Wesfarmers, BHP and most of the banking giants rose. Afterpay, Newcrest and Rio Tinto were among the drags.

What’s driving the market

Today’s rally lifted the market back towards neutral at the end of a choppy week dominated by Covid lockdowns and end-of-financial-year rebalancing. The ASX 200 has been in a holding pattern, reaching today’s halfway mark 14 points or 0.2 per cent below where it started on Monday.

The bullish implications of a sixth straight record high in the US overnight overcame the gravitational pull of lockdown news. The S&P 500 climbed 0.52 per cent to its longest winning streak since February and best run of record finishes since October.

“Investors were encouraged by a stretch of upbeat economic data on jobless claims and the manufacturing index. The Institute for Supply Management’s manufacturing index data emerged as a real bright spot, indicating strong sector expansion and economic growth in June 2021,” Kalkine Group CEO Kunal Sawhney said.

“Meanwhile, the latest weekly unemployment report revealing the lowest number of jobless claims since COVID-19 walloped the US economy appear to have strengthened investors faith in economic recovery.”

Energy was this morning’s standout sector, rising 2.15 per cent after a stand-off threatened to disrupt expected increases in crude production. Brent crude settled US$1.22 or 1.6 per cent higher at US$75.84 a barrel overnight after the OPEC+ cartel was unable to agree on raising output.

The group will meet again tonight after the United Arab Emirates reportedly baulked at plans to increase production by 400,000 barrels a day each month to a total of an additional two million barrels each day by the end of the year.  

Woodside Petroleum rallied 3.32 per cent, Santos 2.06 per cent and Oil Search 1.44 per cent.

The market trimmed its advance after New South Wales reported 31 new local Covid-19 cases in the 24 hours to 8pm last night, up from 24 the previous day. Premier Gladys Berejiklian said health authorities expected case numbers might go higher before falling.

“We are anticipating there could be an increase in numbers over the next few days, then hopefully early next week we should see the impact of the lockdown really turning and having a positive impact,” she said.

The market recovered after the National Cabinet outlined steps to steer the nation through the pandemic, including slashing arrivals into the country by half. All Australians would have access to vaccines by year-end.

Covid news from outside NSW was generally positive. Most of locked-down Queensland will emerge as planned tonight. Brisbane will remain under current restrictions for another 24 hours following three more local cases. Darwin was expected to exit lockdown today on schedule. South Australia reported two new cases, Victoria zero cases.

Going up

The big banks provided much of the early momentum behind the rally. ANZ climbed 0.73 per cent, CBA 0.2 per cent and NAB 0.04 per cent. Macquarie Group gained 1.5 per cent.

Westpac eased 0.18 per cent after agreeing to recompense former clients to the tune of $87 million for failing to inform them about buybacks, share purchase plans and other corporate actions. The payments will affect roughly 32,000 customer accounts.

Insurers were in the spotlight. Suncorp announced it will sell its 50 per cent stake in RACT Insurance to its joint venture partner, the Royal Automobile Club of Tasmania (RACT). The company expects a pre-tax profit of $65 – $70 million. The share price climbed 0.46 per cent.

QBE eased 0.7 per cent after revealing the company faces a class action alleging wrongful denial of business interruption cover during the pandemic. The insurer said it would defend the action.

Student placement service IDP Education was the morning’s standout, surging 19.55 per cent on news it will acquire the British Council’s Indian English language testing system (IELTS). The transaction will bring the rival testing system under IDP’s ownership, allowing the company to build on its leadership position. IDP will pay £130 million.

Chalice Mining put on 5.44 per cent after reporting results from its Julimar deposit in WA. Nuix continued to recover from Wednesday’s record low, rising 6.87 per cent.

Going down

Most of the big miners dipped as yesterday’s soft Chinese factory report crimped buying interest. Rio Tinto fell 0.34 per cent. Fortescue Metals dropped 0.38 per cent. BHP bucked the trend, rising 0.5 per cent. Gold miner Newcrest slid 1.4 per cent despite a second straight rise in the yellow metal overnight.

Coles lost 0.27 per cent and Goodman 0.14 per cent.

The recent recovery in tech stocks seems to have run out of momentum. The sector declined 1 per cent towards a fourth loss in six sessions and a two-week low. Afterpay fell 0.87 per cent, Megaport 4.09 per cent, Appen 1.01 per cent and Iress 0.77 per cent.

Other markets

Chinese equities weighed on Asian trade. China’s Shanghai Composite dropped 1.37 per cent. Hong Kong’s Hang Seng shed 1.4 per cent. Japan’s Nikkei improved 0.29 per cent. The Asia Dow crept up 0.05 per cent.

US futures were flat. S&P 500 futures inched up a point or 0.02 per cent. Nasdaq futures dipped 0.15 per cent.

Oil extended overnight gains. Brent crude climbed 26 cents or 0.34 per cent to US$76.10 a barrel.

Gold gained $1.60 or 0.09 per cent at US$1,778.40 an ounce.

The dollar hovered near its weakest level since December. The Aussie eased 0.03 per cent to 74.63 US cents.

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