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The S&P/ASX 200 briefly regained the 6200 level for the first time in almost two weeks as a post-election rally continued.
The benchmark index traded as high as 6202 before trimming its gain to 48 points or 0.8 per cent at 6187 mid-session.
What’s driving the market
The euphoric mood on Wall Street was undimmed last night by the threat of a drawn-out legal battle as former Vice President Joe Biden inched closer to the presidency. US stocks pushed towards their best weekly returns since April, sustained by the prospect of a president hamstrung by split Congress.
The S&P 500 and Dow Jones Industrial Average both rose 1.95 per cent. The advances extended weekly tallies to date for both indices to around 7 per cent.
“Markets for now are trading with the view of a Biden Presidency and a Republican Senate,” NAB Director, Economics, Tapas Strickland, said. “That combination likely means a Biden Presidency’s ambitions will be curtailed in a grid-locked political scene reminiscent of the later Obama years, with few policy initiatives being enacted by Congress. Nevertheless, that also means less likelihood of regulatory changes (particularly favourable for tech) and tax changes which can be bullish for stocks.”
The market lost some of its gains as US index futures responded to further claims of electoral fraud from US President Donald Trump. The president repeated claims Democrats were “trying to steal” the election in a press conference this morning. S&P 500 index futures skidded 12 points or 0.3 per cent.
Australian action
This morning’s ASX rally ran into technical resistance around the 6200 level. The initial rebound from the February-March pandemic plunge topped out there back in June. Subsequent efforts to break out failed in August and again last month as a rise in Covid-19 cases in the US and Europe triggered a global market retreat.
The Reserve Bank dismissed the prospect of further cuts to the cash rate from a record-low 0.1 per cent. “The Board is not contemplating a further reduction in interest rates,” the bank said in this morning’s quarterly policy update. The bank raised its economic growth forecast and lowered its unemployment outlook.
Going up
Resource stocks led the advance, with support from consumer stocks, technology and Macquarie Group. BHP rose 1.7 per cent, Rio Tinto 1.6 per cent, Fortescue Metals 1.3 per cent, Coles 0.8 per cent and Wesfarmers 0.2 per cent.
Gold stocks sparkled after a ‘risk-off’ move in the US dollar helped lift the precious metal to its highest level in almost seven weeks. Westgold charged 7.3 per cent, Ramelius Resources 7 per cent and Silver Lake Resources 6.5 per cent. Industry giant Newcrest put on 3.3 per cent.
Tabcorp surged 14.6 per cent to an eight-month peak following reports private equity firms were preparing a bid. The company said it was “not aware of, and has not received, any proposal”.
A turnaround in first-quarter net income drove Rupert Murdoch’s News Corp up 14.7 per cent to a post-pandemic high. Net income rebounded to $47 million last quarter from a net loss of $211 million over the same period last year. Total revenues declined 10 per cent to $2.1 billion.
Macquarie Group edged up 1.9 per cent despite warning it expects market conditions to remain challenging. The investment giant declined to offer earnings guidance after declaring a 32 per cent drop in half-year net profit to $985 million.
A profit upgrade following a strong first quarter lifted shares in packaging giant Amcor 4.5 per cent. The company raised its earnings per share growth outlook to 7-12 per cent from previous guidance of 5-10 per cent.
Going down
Yield fell out of favour after four days of strong gains. A spike in the dollar to six-week highs may have been a trigger for overseas investors to take advantage of currency gains. Cromwell Property sank 2.6 per cent, Growthpoint Property 2.1 per cent and GPT 0.8 per cent.
Also weighing on the REIT sector was a downbeat quarterly upbeat from Vicinity Centres. The retail landlord slid 0.4 per cent after reporting a 32 per cent slump in sales from the same period last year. The decline was entirely due to lockdown closures in Victoria. Minus Victoria, sales increased 1.1 per cent.
Woodside Petroleum dropped 0.7 per cent after oil declined for the first time in four sessions. Santos shed 0.3 per cent.
Other markets
Asian markets made modest advances. China’s Shanghai Composite and Hong Kong’s Hang Seng both put on 0.2 per cent. Japan’s Nikkei gained 0.6 per cent.
Gold retreated from its highest level in almost seven weeks. December gold eased $6 or 0.3 per cent to $US1,940.70 an ounce.
Oil extended its first decline in four sessions. Brent crude faded 65 cents or 1.6 per cent to $US40.28 a barrel.
The dollar eased from a six-week high. The Aussie was lately down 0.05 per cent at 72.58 US cents.
What’s hot today and what’s not
Hot today: A move to Egypt proved a trigger for a major turnaround in the fortunes of Papyrus Australia (ASX:PPY). Shares in the waste fibre technology firm quintupled this morning after the company outlined substantial progress since its initial Australian operation foundered. The company took its model of turning waste banana tree trunks into veneers, laminates and other fibre-based products to Egypt and now has a production line and patents for its technology. Shares shot from 2 cents to 10 cents before paring their rise to 330 per cent at 8.6 cents.
Not today: A legal dispute and a bungle over the delivery of writ to an unattended office helped send shares in cloud computing company Buddy Technologies (ASX:BUD) down 8.5 per cent. CST Capital was awarded unspecified damages against Buddy in the District Court of Western Australia after Buddy failed to defend itself against a claim of breach of agreement over a financing arrangement. Buddy said because of Covid-19 office arrangements it was unaware of proceedings until after default judgement had been awarded. Buddy has applied to have the judgement set aside while it prepares a defence.
