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The share market overcame weak overseas leads and a growing Victorian Covid cluster to advance for a fifth day as bond yields declined and Commonwealth Bank shares cracked $100 for the first time.
The S&P/ASX 200 flipped an early 25-point decline into a mid-session gain of 11 points or 0.16 per cent.
Advances in growth stocks, bond proxies and banks outweighed declines in resource companies. Commonwealth Bank touched a record $100.30 before trimming its advance to 0.44 per cent at $100.06.
What’s driving the market
A sharp retreat in bond yields indicated the inflation worries that have dogged the market this year were receding. The yield on ten-year Australian government bonds fell almost four basis points to 1.6 per cent, their lowest in two months.
The decline mirrored a fourth straight drop in US treasury yields overnight after weaker-than-expected housing and consumer confidence data supported the Federal Reserve’s prediction this year’s spike in inflationary pressures will be fleeting.
“After spooking investors for the last few months, inflation fears seem to be subsiding a bit,” Kalkine Group CEO Kunal Sawhney said. “Concerns about high inflation forcing the US Fed to opt for interest rate hikes eased lately after a chorus of Fed officials reiterated that the recent upsurge in inflation would be transitory. As the Fed’s soothing words put investors’ tapering worries to rest for the time being, the US dollar hovered near four-month lows on Tuesday.”
The rate-sensitive tech sector led the ASX advance, rising 1.44 per cent to a two-and-a-half-week peak. The WAAAX leadership group all rose. WiseTech climbed 3.65 per cent, Afterpay 2.11 per cent, Altium 2.33 per cent, Appen 0.52 per cent and Xero 2.23 per cent.
Travel stocks dragged after Victorian health authorities reported six new local Covid cases this morning, swelling the state’s cluster to 15. The state government announced limited restrictions yesterday to contain a breakout in Melbourne’s northern suburbs. Acting Premier James Merlino said the next 24 hours would be critical.
“It’s good that everyone is linked at this stage, but we are concerned about the number and also about the kind of exposure sites,” he said.
The market shrugged off mild overnight declines on Wall Street as US futures rose this morning. S&P 500 futures climbed 13 points or 0.31 per cent. Overnight, the index slipped 0.21 per cent following mildly disappointing economic data.
First-quarter GDP expectations were boosted by a stronger-than-expected seasonally-adjusted 2.4 per cent bump in construction work. The increase was driven by residential building, which expanded 5.1 per cent. Economists had expected an increase closer to 2 per cent.
Going up
Utilities was the second-best performer after tech as investment funds flowed from the bond market into traditional equity alternatives. AusNet climbed 1.16 per cent, APA Group 1.38 per cent and AGL Energy 0.98 per cent.
Brambles gained 1.17 per cent, Wesfarmers 1.09 per cent and Telstra 0.58 per cent.
As CBA passed a milestone, ANZ put on 0.35 per cent, NAB 0.11 per cent and Westpac 0.5 per cent.
Gold stocks rallied after the yellow metal burst through the US$1,900 technical resistance level. Gold was last up $8.70 or 0.46 per cent to US$1,906.70 an ounce. Regis Resources climbed 4.71 per cent, Northern Star 4.2 per cent and Newcrest 2.62 per cent.
An increased final dividend helped data tester ALS hit fresh highs despite news full-year underlying net profit after tax dipped 1.5 per cent. The company more than doubled its final dividend to 14.6 cents per share from 6.1 cents last financial year to reflect “strong current trading conditions and liquidity position”. The share price soared 11.19 per cent.
News that volumes had rebounded to near pre-Covid levels helped lift AMA Group 8.57 per cent. The panel repairer said business had benefitted from a pandemic-era rotation from public to private transport, wet autumn driving conditions and an increase in domestic driving holidays.
Mosaic Brands bounced 19.13 per cent on news the retail group had renewed working capital and seen a strong rebound in foot traffic. Underlying earnings were expected to increase to $48 million this financial year and $50 million in FY2022. The retailer operates a range of clothing brands, including Noni B, Millers and Katies.
Going down
Travel stocks weathered the initial Victorian Covid breakout, but most succumbed to news this morning that the cluster had increased to 15. Corporate Travel Management retreated 1.79 per cent, Qantas 0.32 per cent, Flight Centre 1.26 per cent and Webjet 0.2 per cent.
The resources sell-off resumed after a brief pause yesterday. BHP sank 1.54 per cent to its lowest in a month. Rio Tinto declined 1.38 per cent, Fortescue Metals 1.04 per cent and Woodside 0.5 per cent.
“The spurt in commodity prices seen this year appears to be taking a breather after China’s crackdown on speculative trading activity,” Kalkine’s Mr Sawhney said. “China recently intensified a top-down campaign to rein in runaway commodity prices that continue to create pressure on businesses and factories while endangering the country’s hard-fought economic revival from the pandemic,” he added.
Other major drags included CSL -0.7 per cent and Transurban -0.65 per cent.
Kogan hit reverse following two days of strong gains since Friday’s downbeat trading update. Shares in the online retailer dived 4.79 per cent.
Other markets
A positive morning on Asian markets saw the Asia Dow advance 0.37 per cent, China’s Shanghai Composite 0.4 per cent, Hong Kong’s Hang Seng 0.7 per cent and Japan’s Nikkei 0.17 per cent.
Brent crude edged up four cents or 0.06 per cent to US$68.53 a barrel.
The dollar climbed 0.33 per cent following this morning’s construction report to 77.75 US cents.
