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Aussie shares edged higher for a second day as gains in banks and miners outweighed declines in tech stocks.

The S&P/ASX 200 flipped an early fall of 29 points into a mid-session gain of five points or 0.07 per cent.

The twin engines of the Australian market – the materials and financial sectors – revved up as the morning wore on. The tech sector sank for a third day.

What’s driving the market

Rotation has been the key theme on Wall Street this week after the renomination of Jerome Powell to lead the Federal Reserve convinced traders interest rates are going higher. The market has divided into winners and losers from increased borrowing costs. Lenders have rallied, borrowers declined.

On equity markets, gains in banks helped the Dow climb 0.55 per cent overnight. Pressure on borrowing-dependent growth stocks drove the Nasdaq down 0.5 per cent.

Australian bond yields followed their US counterparts higher this morning as New Zealand’s central bank raised its official cash rate. The yield on ten-year Australian government bonds climbed three basis points to its highest in around three weeks.

Profit margins at the high-street banks have contracted as lenders compete for borrowers with rates at a record low. Commonwealth Bank shares hit a six-month low last week after the bank confirmed the price war had dented profits. The bank’s shares rose 1.51 per cent this morning towards a second straight gain as yields improved. ANZ gained 1.3 per cent, NAB 0.6 per cent and Westpac 0.23 per cent.

The tech sector more than doubled during the pandemic as cheap financing juiced up valuations. The sector faded 0.75 per cent today to its weakest in more than a month.

“Tech stocks took a hit as higher yields are often considered negative for high-growth firms as it makes their future earnings look less attractive,” Kalkine Group CEO Kunal Sawhney said. “The selection of Jerome Powell for the second term seems to have heightened expectations of an earlier-than-expected rate hike, prompting a decline in long-duration assets like tech stocks.”

Trading volumes are expected to tail off tonight as Americans abandon their screens for Thanksgiving.  

“One can expect the US market to see some of the lowest volumes of the year this week,” Mr Sawhney said.

Going up

Two of the three bulk metal majors squeezed a fourth day of gains out of this week’s rebound in iron ore prices. Fortescue Metals gained 0.58 per cent. BHP added 0.89 per cent. Rio Tinto wilted 0.27 per cent. Ore prices have rebounded amid evidence of a pick-up in demand.

“On the back of strict curbs and sluggish demand, China has managed to control its crude steel production at lower levels so far this year,” Mr Sawhney said. “This has left sufficient room for the steel firms to increase output for the rest of the year. Any increase in steel output volumes is expected to lift the demand and prices for iron ore while increasing the attractiveness of mining shares.” 

Energy companies rose after oil shrugged off a coordinated release of national strategic reserves. Beach Energy put on 3 per cent, Woodside 2.27 per cent and Santos 1.78 per cent.

Signs of a turnaround in international travel helped lift Webjet 1.25 per cent. The online travel agent said booking volumes snapped back and its WebBeds business had been profitable since July. Underlying revenues more than doubled in the six months to September from the same period last year. Rival Flight  Centre firmed 0.68 per cent.  

Mesoblast traded unchanged after reporting a smaller quarterly loss as revenues increased. The biotech trimmed its loss to US$22.7 million from US$25.7 million in the prior corresponding period. Revenues more than doubled from US$1.3 million to US$3.6 million.

Going down

Technology One led a tech sell-off, skidding 9.2 per cent to a five-week low in the wake of yesterday’s poorly-received full-year result. WiseTech shed 2.5 per cent, Appen 2.5 per cent and Afterpay 1.07 per cent.

Harvey Norman dipped 0.96 per cent after confirming a sales and profit hit from lockdowns. Aggregated sales at the retailer for July 1 to November 21 were 8.8 per cent weaker than the same period last year. Unaudited preliminary profit fell 35.5 per cent.

ASX declined 0.81 per cent after the market regulator, ASIC, slapped the exchange operator with additional licence conditions following an investigation into a market outage last November. The conditions require the company to improve its project governance and execution practices.

Investment manager Pinnacle slid 8.29 per cent to $16.06 after raising $105 million from institutional investors at $16.70. The proceeds will fund an investment in Australian private-equity firm Five V Capital.

Private health insurer nib holdings eased 0.35 per cent after taking a 50 per cent stake in digital health start-up Midnight Health. The Australian start-up has 4,500 subscribers. nib will inject $4 million into the business.

PointsBet eased 0.13 per cent to a 15-month low despite winning a betting licence in Virginia. The wagering group’s share price has come under pressure from concerns it was losing market share in the US.

Graincorp shed 2.42 per cent as its shares traded ex-dividend.

Other markets

A subdued session on Asian markets saw the Asia Dow dip 0.18 per cent, China’s Shanghai Composite 0.08 per cent and Japan’s Nikkei 0.65 per cent. Hong Kong’s Hang Seng put on 0.16 per cent.

US futures were broadly steady. S&P 500 futures eased a point or 0.02 per cent.

Oil gave back some of its overnight gains. Brent crude retreated 30 US cents or 0.37 per cent to US$81.05 a barrel. The international benchmark jumped 3.3 per cent overnight.

Gold attempted a bounce-back from four days of decline, rising US$6.70 or 0.38 per cent to US$1,790.50 an ounce.

The dollar dipped 0.03 per cent to 72.19 US cents.

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