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Australian stocks rose for a third day as buyers continued to discount the threat of significant economic fallout from the Russia-Ukraine crisis.
The S&P/ASX 200 rallied 86 points or 1.22 per cent, supported by tentatively positive US futures and strength in commodities.
Growth stocks were boosted by a decline in long-term rates. Takeover target Crown Resorts fell on action by the financial regulator.
The Reserve Bank met this morning and was due to release a revised rates statement this afternoon.
What’s driving the market
A rebound rally on the ASX 200 gained momentum after US stocks closed mixed but well off session lows. The Australian benchmark has bounced more than 140 points since last Thursday’s three-week low.
Overnight, the S&P 500 pared a sharp early loss to 0.24 per cent. The Nasdaq Composite rallied 0.41 per cent as market rates declined.
US futures edged higher amid hopes the worst of the Russia-Ukraine sell-off was behind. S&P 500 futures firmed seven points or 0.16 per cent.
“The Russia/Ukraine crisis will continue to produce market volatility, but the direct impact on corporate earnings should be small,” JPMorgan Chase’s influential strategist Marko Kolanovic said.
“Indirect risks are more substantial, given effects of higher commodity prices on inflation, growth, and consumers. However, one silver lining is that the crisis forced a dovish reassessment of the Fed by the market.”
The odds on a 50-basis points US rate hike this month have dwindled as investors bet the added uncertainty over the Ukraine crisis will give the Federal Reserve pause. Overnight, rates relief boosted pockets of the market that depend most on borrowing to fund growth.
The Reserve Bank met this morning and was due to update the market on its rates outlook at 2.30 pm AEDT. With the cash rate certain to be left at a record low 0.1 per cent, the main interest lay in whether the central bank modifies the language in the Rate Statement to allow for increases this year.
“We do not expect any change to policy at the RBA Board meeting in March,” CommSec told clients. “There has been some slight change in language by the RBA since the February meeting, noting rate hikes are plausible in 2022 and they would like to see a couple more CPI [consumer price index] prints.”
A report this morning showed consumer confidence wilted last week as Russia invaded Ukraine, Covid spread in WA, and Queensland and NSW battled flooding. The ANZ-Roy Morgan index declined 2.6 per cent to 99.2.
Going up
The battle for Virtus Health hotted up after European investment firm CapVest topped yesterday’s improved bid from Australian private-equity firm BGH Capital. CapVest revised its offer to $7.80 per share, 15 cents higher than BGH’s latest proposal. Virtus shares jumped 4.43 per cent to $7.78.
Commonwealth Bank climbed 2.66 per cent after cashing in part of its investment in China’s Bank of Hangzhou (HZB). CBA will receive roughly $1.8 billion from entities owned by Hangzhou Municipal Government for a shareholding of 10 per cent in the Chinese bank.
CBA will book a post-tax gain of around $340 million. The bank will retain a 5.57 per cent stake in HZB.
Nickel miner IGO bounced 7.5 per cent after ending talks with Glencore for the potential purchase of the CSA Copper Mine in Cobar, NSW. IGO said negotiations were discontinued after the companies were unable to agree a commercial agreement. The share price fell when news of the talks first broke last week.
“Robust” coal prices helped miner Yancoal swing to a $791 million full-year net profit after losing $1.04 billion in FY20. Revenues were a record $5.4 billion. Shares in the miner surged 13.51 per cent to a near six-month high.
Rate-sensitive growth stocks rose as a decline in long-term US rates eased pressure on borrowing costs. Afterpay parent company Block jumped 13.26 per cent, Imugene 13.83 per cent, PointsBet 13.24 per cent and Novonix 9.34 per cent.
Uranium miners were boosted by the prospect of a nuclear arms race after President Vladimir Putin placed Russia’s nuclear arsenal on high alert. Paladin Energy climbed 10.39 per cent, Vimy Resources 22.22 per cent and Deep Yellow 13.12 per cent.
Insurers searched for a bottom after several days of decline as floods swept parts of Queensland and NSW. Suncorp bounced 2.04 per cent. IAG inched up 0.33 per cent after reporting it had received 6,700 claims and expected more in coming days. QBE rose 0.61 per cent.
Viva Energy firmed 2.46 per cent on plans to build a hydrogen service station in Geelong.
Going down
Crown Entertainment dipped 0.16 per cent as its legal woes deepened. The financial regulator AUSTRAC announced it would commence civil proceedings today against Crown Melbourne and Crown Perth for alleged failure to comply with anti-money laundering laws.
Crown said it cooperated with the regulator’s investigation and flagged the likelihood of proceedings in its annual report and half-year results.
Gold miners eased from multi-week peaks after the yellow metal failed to hold yesterday’s gains. Newcrest was the only company in the elite ASX 20 to lose ground, falling 1.42 per cent.
Sandfire Resources skidded another 14.18 per cent in the wake of yesterday’s poorly-received trading update. Perseus Mining shed 6.44 per cent, Evolution Mining 4.8 per cent and Ramelius Resources 3.78 per cent.
Zip Co slid 9.05 per cent to $2.01 after raising $148.7 million from institutional investors at $1.90 per share. Retail shareholders will have an opportunity to buy at the same price.
Healthy fast food chain Oliver’s Real Food was suspended after failing to lodge its half-yearly accounts before last night’s deadline. The company blamed Covid and issues with its auditor.
Other markets
A rebound session on Asian markets saw the Asia Dow rise 0.83 per cent, China’s Shanghai Composite 0.26 per cent, Hong Kong’s Hang Seng 0.12 per cent and Japan’s Nikkei 1.73 per cent.
Oil firmed above US$100 a barrel. Brent crude advanced 11 US cents or 0.1 per cent to US$101.10 a barrel.
Gold resumed its advance, rising US$4.50 or 0.25 per cent to US$1,905.20 an ounce.
The dollar consolidated overnight gains, lately up 0.06 per cent at 72.62 US cents.
