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A drop in new Covid cases in Queensland and end-of-quarter “window dressing” helped the share market reverse two days of declines.
The S&P/ASX 200 surged almost 88 points in the first half-hour and – unlike Monday and Tuesday – continued higher. Mid-session, the index was ahead 122 points or 1.8 per cent and on track for its best day of the year.
What’s driving the market
The pattern this week has been bright opens followed by session-long fades and glum closes. Not so today. The last session of the quarter is traditionally a time when fund managers with performance bonuses on the line push the index as high as they can. “Window dressing” is industry jargon for the kind of repositioning that puts the best possible spin on portfolios when fund managers report to investors.
The S&P/ASX 200 was on course for a monthly gain of around 4.1 per cent. The index has risen in three of the last four quarters since the pandemic sell-off bottomed out last March.
Concerns about a Covid-19 outbreak in Queensland were soothed by news the state recorded just two new cases of local transmission in the last 24 hours, down from eight reported yesterday. State Premier Annastacia Palaszczuk said the news was “absolutely encouraging”, raising hopes a snap three-day lockdown will end on schedule tomorrow.
“If we see very good testing rates across Queensland and we don’t see any unlinked community transmission, the signs for Easter are looking positive,” Ms Palaszczuk said. “If it’s encouraging news tomorrow, we will be lifting the hotspot for Greater Brisbane,” she added.
This morning’s rally flew in the face of an otherwise dour set of leads. US stocks fell overnight, along with raw materials including iron ore, oil and metals. The S&P 500 shed 0.32 per cent as a spike in bond yields dented hopes the market was over its jitters about rising borrowing costs.
“Selling pressure intensified because bond yields broke to new highs for the year again pounding technology stocks,” Jim Paulsen, chief investment strategist at Leuthold Group, told CNBC. “However, discussions surrounding yet another forthcoming stimulus bill and a surge in consumer confidence reminded investors that the world economy is experiencing an incredibly strong economic recovery giving cyclicals, small cap stocks, and most international markets a revival bounce,” he added.
Going up
Eighteen of the 20 heavyweights of the ASX 20 rallied. Roughly nine out of ten companies on the broader ASX 200 advanced.
BHP climbed 2.3 per cent to its highest level in two weeks. Rio Tinto added 1.9 per cent and Fortescue Metals 0.8 per cent.
Pokie-maker Aristocrat Leisure trimmed a three-day decline, rising 3.6 per cent. Supermarkets Coles and Woolworths added 2.3 and 2.1 per cent, respectively. Wesfarmers added 2.4 per cent, CSL 1.6 per cent and Goodman Group 1.2 per cent. Telstra advanced 0.9 per cent to a new seven-m0nth peak.
A sharp increase in bond yields over the last 24 hours lifted lenders. The Australian ten-year yield jumped more than ten basis points to 1.82 per cent. CBA rose 1.9 per cent, ANZ 1.8 per cent, NAB 1.6 per cent and Westpac 1.4 per cent. Macquarie Group gained 2.4 per cent.
Travel agents and other “reopening” stocks were lifted by the Queensland news. Webjet gained 2.8 per cent, Flight Centre 3.7 per cent and Qantas 3 per cent.
Beleaguered gold miner Resolute bounced 3.6 per cent from five-year lows after reaffirming production and cost guidance. The share price crashed last week after the Ghanaian government terminated the lease for the company’s Bibiani mine.
Going down
The sudden surge in borrowing costs was bad news for tech companies and other industries whose valuations depend on future earnings. Afterpay dropped 0.2 per cent to its lowest level since December. Appen shed 2 per cent. Openpay slid 4.2 per cent after tapping investors for $76.5 million.
Gold miners followed the yellow metal south. Overnight, gold skidded 1.7 per cent as rising yields and a strong greenback dulled its appeal. Here, Northern Star eased 2.1 per cent, Evolution 1.7 per cent, Ramelius 1.6 per cent and Newcrest 0.1 per cent.
Myer faded 2.2 per cent after announcing the closure of its Knox outlet in Victoria as part of the department store’s rationalisation as online sales increase. Harvey Norman shed 3.6 per cent as it traded without its dividend.
Other markets
Asian markets were mixed. The Asia Dow was little changed at +0.02 per cent. China’s Shanghai Composite dropped 0.13 per cent, Hong Kong’s Hang Seng added 0.79 per cent and Japan’s Nikkei shed 0.46 per cent.
S&P 500 futures climbed five points or 0.1 per cent.
Oil rebounded from overnight weakness as traffic resumed through the Suez Canal. Brent crude bounced 14 cents or 0.2 per cent to US$64.31 a barrel. Gold faded $3.90 or 0.2 per cent to US$1,682.10 an ounce.
The dollar dipped 0.04 per cent to 76.05 US cents.
