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A rally in ‘recovery plays’ helped lift the share market to a five-month high after progress towards treatments for Covid-19 fuelled strong overseas gains.
The S&P/ASX 200 hit 6199.2, its highest point since the second week of the February-March market meltdown, before paring its gain to 29 points or 0.5 per cent mid-session at 6159.
Banks, shopping centres and travel and tourism stocks pushed higher as traders snapped up stocks with good exposure to a post-pandemic economic recovery. Tech darlings Afterpay and Xero recorded all-time highs.
What’s driving the market
US and European stocks surged after new data showed a steady decline in US coronavirus infection numbers, US regulators authorised the use of blood from recovered coronavirus patients to treat new patients and a report said the White House was considering fast-tracking an experimental vaccine.
The S&P 500 climbed 1 per cent to an all-time high. Several European benchmarks rallied more than 2 per cent.
Australian investors took their cues from the US and bought ‘recovery plays’ – companies that have suffered most from the pandemic and have plenty of upside as the economy recovers.
Travel agents Flight Centre and Webjet surged 6.2 per cent and 4.2 per cent, respectively. Shopping centre operators Stockland and Scentre Group gained 5.9 and 4.2 per cent. Corporate Travel Management gained 5 per cent and Qantas 1.3 per cent.
The big four banks all fired higher in the hope an anticipated wave of bad debts may be smaller and briefer than expected. NAB put on 4.1 per cent, Westpac 3.9 per cent, ANZ 3.4 per cent and CBA 2 per cent. Macquarie Group added 1.2 per cent.
Earnings season
The rally in shopping centre operators came despite confirmation of a plunge in property prices and news that fashion retailer Mosaic Brands will close up to 500 stores over two years. Mosaic shares skidded 13.2 per cent as the owner of the Rivers, Katies and Noni B brands reported a full-year underlying loss before tax of $45.8 million, a result “utterly derailed” by bushfires and nine and a half weeks of pandemic store closures.
Stockland gained 5.9 per cent after reporting a statutory full-year loss of $14 million as the company wrote down the values of its commercial and retirement properties. Scentre Group was rewarded with a rise of 4.2 per cent as a collapse in property values tipped the country’s largest shopping mall owner to a half-year loss of $3.6 billion.
The morning’s big winners among reporting companies were Bingo Industries +13.5 per cent and Omni Bridgeway +5.9 per cent. Alumina gained 4.4 per cent, Oil Search 2.3 per cent and Spark Infrastructure 0.9 per cent.
The list of losers was topped by media group Seven West, down 16.1 per cent as weak advertising revenues underpinned a 66.1 per cent plunge in full-year net profit after tax. Nanosonics slid 8.9 per cent, Blackmores 4.3 per cent, Ampol 3.6 per cent, Western Areas 2.3 per cent, Ansell 2.1 per cent and Qube Holdings1.4 per cent.
Other markets
US index futures rose following reports of progress in trade talks with China. S&P 500 index futures gained 17 points or 0.5 per cent. US Treasury Secretary Steven Mnuchin said both sides saw progress in implementing the Phase One trade deal and were “committed to taking the steps necessary to ensure the success of the agreement”.
Japan’s Nikkei set the pace in Asia, climbing 1.6 per cent. China’s Shanghai Composite tacked on 0.3 per cent. Hong Kong’s Hang Seng retreated 0.2 per cent.
Oil edged higher. Brent crude rose 13 cents or 0.3 per cent to $US45.26 a barrel. Gold bounced $2.90 or 0.2 per cent to $US1,942.10 an ounce.
The dollar rallied 0.15 per cent to 71.72 US cents.
What’s hot today and what’s not:
Hot today: Dual-listed RTG Mining (ASX:RTG) hit a 19-month high after an arbitration tribunal awarded the company 100 per cent control of the Mabilo project in the Philippines and $33.6 million in damages and costs against a former joint partner. The Singapore International Arbitration Centre ruled that a joint venture agreement with Galeo Equipment had been validly terminated due to breaches by the Philippines rental company. RTG’s share price more than doubled from 12 cents to 26.5 cents before easing to 21 cents, a gain of 75 per cent.
Not today: Advertising-dependant media companies have been amongst the hardest hit by the pandemic and among the last to rise off their lows. Seven West (ASX:SWM) sank 16.1 per cent this morning after reporting a 66.1 per cent slump in full-year net profit to $40.8 million. The company declined to provide guidance for the year ahead, citing “volatile and unpredictable” advertising markets.
