ASX Update: Shares join tentative recovery in risk assets

Signs of a weekend recovery in risk appetite helped lift the ASX towards back-to-back gains.

The S&P/ASX 200 shrugged off negative leads, climbing 22 points or 0.3 per cent by mid-session.

Energy and mining stocks led the advance, with support from industrials. The banks were mixed. Tech stocks declined.

What’s driving the market

The market looked past a fifth straight fall on Wall Street amid a wider rally in risk assets this morning. US equity futures, crude oil and the dollar improved. Defensive assets such as gold declined.

S&P 500 futures firmed nine points or 0.2 per cent, raising hopes the weekend will act as a circuit-breaker to the index’s longest losing run since February. On Friday the S&P 500 fell 0.77 per cent.

The revival in futures came amid speculation a recent turn of weak US economic data will force the Federal Reserve to delay the long-awaited taper of its stimulus program. Goldman Sachs last week cut its economic outlook for the year, citing the impact of the delta variant on consumer spending.

“It is increasingly evident that the impact of delta has delayed any Federal Reserve attempt at tapering, just as it has given fresh momentum to the Big Tech stocks with growth outperforming value so far this quarter,” strategists at Jefferies wrote.

Multi-year highs in nickel and aluminium, plus a second day of gains in oil helped lift the materials and energy sectors for a second session.

“The rally in base metals gathered pace last week amid signs of tightness across most markets,” commodities strategist Daniel Hynes of Hynes Commodities said. “Sentiment was boosted on Friday following better than expected credit growth in China… This raised hopes that the manufacturing and construction activity would rise, and with it demand for commodities.”

Among the heavyweights, Fortescue Metals firmed 1.97 per cent, Woodside Petroleum 1.56 per cent, BHP 0.97 per cent and Rio Tinto 0.88 per cent. Other risers included Pilbara Minerals +6.59 per cent, Lynas Rare Earths +4.72 per cent and OZ Minerals +5.46 per cent.

The Australian market fell 1.5 per cent last week amid worries about this week’s August employment report, the first to show the full impact of lockdowns in the eastern states. Forecasts for the unemployment rate due to be revealed on Thursday cover an extraordinarily wide range from 4.8 per cent (up two basis points) to 5.5 per cent (+nine basis points).

“Fair to say no one has any idea (including myself) just how bad this week’s labour force data will be, an enormously wide market survey on employment with credible forecasters at each end,” tweeted Alex Joiner, chief economist at IFM Investors.

Going up

Sydney Airport climbed 4.75 per cent after the board backed a revised $23.6 billion takeover offer from a consortium of superannuation funds. Shares that closed at $8 on Friday rallied to $8.38 after the funds increased their offer a second time to $8.75 cash per share over the weekend. The board said that in the absence of a superior offer it would “unanimously recommend” shareholders vote in favour of the proposal.

Aristocrat Leisure continued to break new ground, rising 4.06 per cent. Shares in the poker machine manufacturer that traded below $15 during the pandemic low neared $50 this morning, rising as high as $49.02.

Uranium stocks provided much of the morning’s excitement after yellowcake hit its strongest level since 2014. Demand has been reignited by the push for cleaner, greener fuels.

Energy Resources almost doubled in value before trimming its advance to 30.3 per cent. 92 Energy gained 29.13 per cent, Alligator Energy 18.33 per cent, Deep Yellow 23.56 per cent and Delecta 35 per cent.

The banks traded mixed but mostly higher. ANZ firmed 0.43 per cent, CBA 0.17 per cent and Westpac 0.14 per cent. NAB dipped 0.69 per cent after Credit Suisse downgraded its rating on the bank’s shares to ‘Neutral’ from ‘Outperform’.

Nuix gained 1.49 per cent after announcing the acquisition of US language software specialist Topos Labs. Nuix said it will fund the US$5 million up-front cost and performance payments from ordinary operations.

Going down

Growth stocks retreated as borrowing costs increased. The yield on ten-year Australian government bonds firmed four basis points. Appen shed 3.01 per cent, Afterpay 2.28 per cent and Megaport 2.02 per cent.

Qantas retreated 0.56 per cent after the competition regulator knocked back a bid to share flights with Japan Airlines. The ACCC said the proposed alliance was not in the public interest. The two airlines accounted for around 85 per cent of flights between Australia and Japan before the pandemic.

City Chic Collective fell 3.43 per cent on news Chief Financial Officer Munraj Dhaliwal had resigned after three and a half years with the plus-size retailer.

Among stocks trading ex-dividend, Chorus fell 2.2 per cent, Regis Resources 1.63 per cent and Healius 1.44 per cent. HUB24 reversed to a gain of 1.2 per cent

Other markets

A generally downbeat session on Asian markets saw the Asia Dow shed 0.75 per cent, Hong Kong’s Hang Seng 1.92 per cent and Japan’s Nikkei 0.31 per cent. China’s Shanghai Composite edged up 0.18 per cent.

Oil added to Friday’s rebound gains. Brent crude rose 36 US cents or 0.49 per cent to US$73.29 a barrel.

Gold dipped 80 US cents or 0.04 per cent to US$1,791.30 an ounce.

The dollar rebounded more than half a percentage point to 73.59 US cents.