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US President Donald Trump’s departure from hospital and the prospect of a rate cut and a big-spending budget inspired meagre share market gains following yesterday’s boom session.
A day after surging 2.6 per cent, a weary-looking S&P/ASX 200 inched up three points or less than 0.1 per cent by mid-session despite strong overseas leads.
What’s driving the market
President Trump was discharged from Walter Reed Medical Center this morning, returning to the White House after three days in hospital following a positive test result for Covid-19. US stocks rose firmly overnight after Trump tweeted he was preparing to depart. The S&P 500 rose 1.8 per cent and the Nasdaq Composite 2.32 per cent.
US index futures declined following a Bloomberg report that a congressional panel investigating the tech sector will recommend breaking up the likes of Apple and Amazon to increase competition. S&P 500 futures dipped less than 0.1 per cent. Futures for the tech-heavy Nasdaq fell 0.3 per cent.
This morning’s trade suggests the ASX pre-empted the overnight action during yesterday’s powerful surge, the benchmark index’s best session since mid-June. Investors sat on their hands ahead of this week’s major “event risks”: this afternoon’s Reserve Bank rate decision and tonight’s Federal Budget announcement.
“The highly-anticipated 2020-21 federal budget… will detail the government’s economic plan for supporting the recovery, where media leaks point to bringing forward legislated income tax cuts, an investment tax allowance, more funding for infrastructure and, we learned over the weekend, widespread subsidies for employers taking on up to 100,000 apprentices,” NAB Head of FX Strategy, Ray Attrill, said. “While the RBA is expected to be on hold in October, we expect the RBA to cut rates at the following November meeting.”
A mixed market saw gains in resource and technology stocks outweighed by declines in banks, industrials and traditional defensive sectors.
Going up
Gold stocks sparkled following news Northern Star Resources and Saracen Mineral Holdings will merge to form one of the largest gold companies in the world. The “merger of equals” will see Northern Star acquire 100 per cent of Saracen. The companies say the merger will unlock up to $2 billion in pre-tax synergies. Saracen shares jumped 7.5 per cent and Northern Star 7.4 per cent. Rival Newcrest rose 0.5 per cent.
The energy sector continued to repair, rising for a second day after ending last week at its lowest level since early April. Cooper Energy put on 4.6 per cent, Oil Search 4.4 per cent, Santos 2.6 per cent and Woodside 1.4 per cent.
Specialty retailer Baby Bunting rose 4.4 per cent to a new peak after reporting 17 per cent year-to-date growth in sales. Fruit and nut grower Select Harvests jumped 15.2 per cent after raising $81.7 million from institutions.
Going down
Almost two-thirds of the ASX 20 index of market heavyweights declined. Insurer IAG sagged 1.9 per cent after agreeing to pay $138 million to settle a class action over add-on insurance products. Wesfarmers gave up 1.3 per cent, Goodman Group 1 per cent and Brambles 0.9 per cent. The big four banks shed between 0.3 and 0.5 per cent.
Property groups succumbed to profit-taking a day after touching a four-month high. Mirvac dropped 2.6 per cent, GPT Group 2.4 per cent, Dexus 2.3 per cent and Stockland 1.4 per cent.
Pharmaceutical company Mayne slumped 15.8 per cent on news of a delay in US regulatory approval for a generic version of the NuvaRing birth control ring. CEO Scott Richards said the company was confident it could address issues raised in a letter from the US Food and Drug Administration.
Other markets
Asian markets built on yesterday’s advance. Hong Kong’s Hang Seng put on 0.5 per cent and Japan’s Nikkei 0.3 per cent. Chinese markets remained closed for Golden Week holidays.
Oil extended its 5.1 per cent overnight surge. Brent crude rose five cents or 0.1 per cent to $US41.34 a barrel. Gold retreated $4.20 or 0.2 per cent to $US1,915.80 an ounce.
The dollar dipped 0.07 per cent to 71.88 US cents.
What’s hot today and what’s not
Hot today: A new arrival in the increasingly crowded mobile banking sector landed with a splash this morning. Douugh (ASX: DOU), which describes itself as a “next-gen neobank and AI-driven financial wellness app” soared 276 per cent upon its ASX debut. The company says it offers tailored financial solutions to help people save more and build wealth. Douugh raised $6 million via a pre-listing capital raising and intends to launch in the US in coming weeks before an Australian launch next year.
Not today: Drilling updates brought little joy for investors in Cohiba Minerals (ASX:CHK) and Krakatoa Resources (ASX:KTA). Shares in Cohiba sank 18.8 per cent after the first hole at its Horse Well prospect encountered black shales with evidence of sulphide mineralisation. A second hole is underway. Krakatoa shed 13.3 per cent despite intersecting “several faults, significant quartz veining, pervasive sericite alteration and disseminated sulphide mineralisation”.
