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The share market kept on track for its best week since March as a rebound in resource stocks gathered pace.  

The S&P/ASX 200 rallied 28 points or 0.43 per cent by mid-session. Today’s gain, the fourth in five sessions, positioned the benchmark for a weekly advance of around 2.1 per cent.

Miners and energy producers led for a second day as iron ore, crude oil and metals trimmed heavy losses from earlier in the week. Defensive assets retreated as risk appetite improved following four days of gains on Wall Street.

What’s driving the market

Tentative optimism has been creeping back into the market this month amid hopes recession expectations had become excessive in the face of rising interest rates. Overnight, the S&P 500 climbed 1.5 per cent after Fed Governor Christopher Waller said the US economy would be cushioned by the strength of the labour market.

“I personally think some of the fears of a recession are overblown,” Waller said. “We may have to take the risk of causing some economic damage, but I don’t think, given how strong the labour market is right now, that that should be that much,” he added.

The S&P 500’s four-session winning run matches its best of the year, back in March. The rally cut the US benchmark’s loss for the year to around 18 per cent, lifting it back out of a technical bear market.

A V-shaped week for resource stocks delivered further gains this morning as commodity prices responded to Chinese stimulus proposals. Bloomberg reported Beijing was considering allowing local governments to sell an additional US$220 billion in special bonds to fund infrastructure spending.

Iron ore on China’s Dalian Commodity Exchange firmed 2.2 per cent this morning. The advance built on yesterday’s 3.9 per cent rebound. Copper bounced 4.2 per cent overnight. Brent crude jumped 3.9 per cent.

“Industrial metals witnessed a sharp rebound on the LME after China, the world’s biggest consumer of industrial metals, announced fresh support for the economy. A part of the rebound in the commodities market could be because of short-covering after the recent selloff in the commodities space,” Kunal Sawhney, chief executive of research group Kalkine, said.

“However, it will be too early to say that the bottom is in place in the commodities market as the global growth outlook is dwindling, pointing toward demand destruction, which is a bigger risk for commodities prices. Hence, one should take the rebound in the Australian market with a pinch of salt.”

The dollar continued to rise off two-year lows after a record trade surplus announced yesterday underlined the strength of the economy. The Aussie was lately buying 68.44 US cents.

Going up

Lithium miners outpaced the broader market as the metal continued to weather recent pressures on commodity prices. Morningstar predicted undersupply would keep prices strong until at least 2030.

Liontown Resources gained 7.89 per cent, Allkem 6.74 per cent and Pilbara Minerals 7.5 per cent.

Vulcan Energy jumped 7.14 per cent after striking a deal with Italy’s largest geothermal energy producer to develop Vulcan’s Italian project. EnelGreen Power will partner on a joint scoping study.

The heavyweight bulk metal trio of BHP, Rio Tinto and Fortescue Metals added between 1.35 and 1.92 per cent.

Energy giants Santos and Woodside put on 2.39 and 2.64 per cent, respectively. Uranium miner Paladin Energy gained 6.78 per cent. Lynas Rare Earths strengthened 5.19 per cent.

Beaten-down gold miner St Barbara bounced 6.63 per cent after meeting production guidance for the June quarter.

Mobile app-maker Life360 brought its strongest close in more than two months within reach after rising 12.67 per cent.

Going down

Bond proxies were out of favour as the yield on Australian bonds improved for a second day. Woolworths dropped 0.81 per cent. Coles lost 0.54 per cent. Telstra retreated 0.9 per cent, CSL 0.24 per cent and Goodman Group 1.98 per cent.

Packager Orora gave up 5.93 per cent, fast food franchisor Collins Foods 3.89 per cent and vitamins manufacturer Blackmores 1.64 per cent.

Investment managers saw funds under management (FUM) contract during last month’s market volatility. Magellan’s FUM shrank to $61.3 billion from $65 billion as the struggling manager saw net outflows of $5.2 billion.

Funds under management at GQG Partners shrank to US$31 billion from US$33.7 million in May. Magellan shares fell 2.12 per cent. GQG dipped 0.75 per cent.

Other markets

Asian markets added to yesterday’s gains. The Asia Dow advanced 0.94 per cent. China’s Shanghai Composite tacked on 0.27 per cent, Hong Kong’s Hang Seng 0.71 per cent and Japan’s Nikkei 1.41 per cent.

US futures eased ahead of tonight’s monthly employment update. S&P 500 futures fell four points or 0.1 per cent.

Oil was broadly steady. Brent crude dipped three US cents or 0.03 per cent to US$104.52 a barrel.

Gold built on its first rise in eight sessions. The yellow metal firmed US$1.70 or 0.1 per cent to US$1,741.30 an ounce.

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