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Aussie shares hovered near four-week highs as investors weighed the lowest unemployment rate in a decade, mixed coronavirus data and soft leads from the US.

The S&P/ASX 200 reached mid-session six points or less than 0.1 per cent in the red after trading in a tight 22-point trading range. The index closed yesterday at its highest level in almost a month.

Gains in Fortescue Metals, Newcrest and Goodman Group helped cushion the market against declines in banks, healthcare and BNPL players.

What’s driving the market

Investors sat on their hands while they await stronger leads from Wall Street and greater clarity on the Covid-19 outlook.

Buying interest was restrained by signs the delta coronavirus variant was gaining footholds beyond New South Wales. The Victorian government made masks mandatory in secondary schools and workplaces ahead of reporting ten new local cases today.

Queensland extended existing restrictions in the south-east of the state for seven days after recording three new local cases. The news was better in NSW, where new local cases fell to 65 in the 24 hours to 8pm last night from 97 over the prior corresponding period.

The index briefly came off its lows on news unemployment dropped below 5 per cent last month for the first time in more than a decade. The official rate eased to 4.9 per cent from 5.1 per cent in May. Economists had expected the jobless rate to hold steady at 5.1 per cent.

The economy added a total 29,100 jobs as an increase of 51,600 full-time positions outweighed a decline of 22,500 part-time positions. The figures implied some of the long-term “under-employed” – those working part-time but seeking more work – had been able to find full-time positions.

Bjorn Jarvis, head of labour statistics at the Australian Bureau of Statistics, said the jobless rate was the lowest since December 2010.  Employment was 1.2 per cent higher than at the start of the pandemic.

“The declining unemployment rate continues to coincide with employers reporting high levels of job vacancies and difficulties in finding suitable people for them,” Mr Jarvis said.  

Overnight, US stocks closed mixed but little changed as investors digested a surge in producer prices, a dovish outlook from the Reserve Bank and a broadly positive slate of corporate earnings. The S&P 500 and Dow edged up a little over 0.1 per cent. The Nasdaq dipped 0.22 per cent.

Growth in Chinese factory activity and retail sales declined less than expected last month from rebound-fuelled levels, but quarterly GDP narrowly missed expectations. Second-quarter GDP grew 7.9 per cent, down from 18.3 per cent the previous quarter and short of the 8 per cent consensus among economists.

Going up

The materials sector rallied 0.8 per cent to within touching distance of its May record high despite a negative night on Wall Street for miners. Fortescue Metals put on 1.51 per cent, Rio Tinto 1.13 per cent and BHP 0.26 per cent.  

Gold stocks shone for a second day as a surge in US producer prices encouraged hedging. St Barbara climbed 5.81 per cent, Ramelius 2.97 per cent and Newcrest 1.35 per cent.

Whitehaven Coal climbed 3.03 per cent as investors anticipated a strong full-year result on the back of soaring coal prices. The miner said thermal coal prices were at ten-year highs. Production declined by 34 per cent last quarter from the corresponding prior period.

Spark Infrastructure jumped 7.07 per cent to $2.65 after confirming it had received and rejected two conditional, non-binding offers from a consortium including the Ontario Teachers’ Pension Plan Board and US investment giant Kohlberg Kravis Roberts (KKR).

The initial offer of $2.70 and a revised offer of $2.80 were both substantially higher than the electricity infrastructure firm’s price of $2.30 before news of the approach leaked. The board said the offers undervalued Spark, but discussions would continue.

Sydney Airport advanced 0.58 per cent to $7.85 after knocking back a takeover proposal from a consortium of investors. The board said the unsolicited, conditional and non-binding offer of $8.25 per share undervalued the airport and was “not in the best interests of Securityholders”. Shares in the airport traded above $9 shortly before the start of the pandemic.

Fund manager Australian Ethical edged up 1.25 per cent after reporting a 12 per cent increase in funds under management to $6.07 billion last quarter. The quarter saw record in-flows.

The big supermarkets benefitted from the threat of lockdowns widening from Greater Sydney. Coles gained 0.35 per cent, Woolworths 0.21 per cent and IGA operator Metcash 0.77 per cent.

Going down

Buy now pay later players remained under pressure following PayPal’s launch of an instalment payment plan and news yesterday that Apple will soon follow. Afterpay slipped 1.95 per cent, Z1P Co 3.96 per cent and Openpay 3.1 per cent.

Sezzle bucked the trend, bouncing 3.14 per cent after securing a US$30 million investment from DFS Services, a subsidiary of NYSE-listed digital payments firm Discover Financial Services.  

A rebound in energy prices helped Woodside Petroleum lift sales revenue by 15 per cent last quarter to $1.285 billion. Production dipped 4 per cent due to scheduled maintenance and adverse weather. The share price slipped 1.12 per cent.

The big four banks have lost momentum with a slide in bond yields since inflationary fears peaked in March. The yield on ten-year Australian government bonds this morning traded at its lowest level since mid-February.

CBA dipped 0.3 per cent, ANZ 0.33 per cent, NAB 0.74 per cent and Westpac 0.75 per cent.

Other markets

The Asia Dow inched up 0.05 per cent. Hong Kong’s Hang Seng climbed 0.85 per cent. China’s Shanghai Composite dipped 0.21 per cent and Japan’s Nikkei shed 0.9 per cent.

S&P 500 futures eased almost five points or 0.11 per cent.

Oil added to overnight losses following reports of a possible OPEC+ deal to increase production. Brent crude sagged 66 cents or 0.88 per cent to US$74.10 a barrel.

Gold added to near four-week highs, rising US$2 or 0.11 per cent to US$1,827 an ounce.

The dollar drifted 0.21 per cent lower to 74.64 US cents.

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