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Resource stocks piloted the share market higher for a fourth day after solid US economic data soothed recession concerns.  

The S&P/ASX 200 climbed 68 points or 0.96 per cent after overcoming a mid-morning fade.

Ten of eleven sectors advanced, led by materials, industrials and REITs. Consumer staples trailled as investors favoured sectors with greater leverage to a market recovery after four weeks of decline.

What’s driving the market

The ASX 200 rallied to within a point of 7200 before paring its advance to 7181. The index has bounced more than 240 points since Friday, but struggled to hold intraday gains in recent sessions as recession worries clouded the outlook on both sides of the Pacific.

The market halved its opening gains before regaining momentum on confirmation wages were on the rise, but not as quickly as economists anticipated. The Wage Price Index increased a seasonally-adjusted 0.7 per cent last quarter. Annual wage growth edged up to 2.4 per cent from 2.3 per cent in the previous quarter.

“The annual rate of wage growth has risen for each of the last five quarters from a low point of 1.4 per cent in December quarter 2020,” Michelle Marquardt, head of Prices Statistics at the ABS, said.

Economists expected slightly stronger growth of 0.8 per cent for the quarter and 2.5 per cent for the annual measure. The dollar eased almost 0.2 per cent to 70.17 US cents.

The report reduced pressure on the Reserve Bank to raise rates by a larger-than-usual 40 basis points next month.

“The wage result should not stand in the way of a rate hike in June, but it does question the need for the RBA to risk unduly destabilising the economy with an aggressive 40 bps move,” BetaShares’ chief economist, David Bassanese, said.

US stocks surged overnight as growth in retail sales and industrial production dampened fears of an economic slowdown. The S&P 500 climbed 2.02 per cent.

“Investors welcomed an encouraging report on retail sales, which painted a picture of a healthy US economy and eased worries around persistently high inflation crimping consumer spending,” Kunal Sawhney, chief executive of research group Kalkine, said.

Going up

The return of Andrew Forrest to a more hands-on role helped boost Fortescue Metals by 2.11 per cent. An executive shake-up at the miner brought Forrest across from a non-executive role to Executive Chair. The CEOs of the iron ore miner and its green-energy business will both report to him.

Optimism about the improving outlook for Chinese demand as Shanghai reopens lifted the materials sector 2.6 per cent. South32 put on 5.59 per cent, Champion Iron 5.29 per cent and OZ Minerals 3.81 per cent. Heavyweights BHP and Rio Tinto both gained at least 2.4 per cent.

An earnings upgrade lifted BlueScope Steel 1.2 per cent. Improved prices in the US allowed the steelmaker to raise its second-half earnings forecast to $1.375-$1.475 billion from previous guidance of $1.2-$1.3 billion.

Troubled fund manager Magellan jumped 1.92 per cent on news UK banking giant Barclays tipped another $75 million into a Magellan-backed investment venture, increasing its valuation. Barclays lifted its stake in Barrenjoey Capital to 18.2 per cent from an initial 9.9 per cent.

A double dose of positive news propelled Worley up 1.13 per cent to a pandemic-era high. The engineering group announced it had been awarded a three-year contract to service five of Shell’s offshore assets in the Gulf of Mexico. The company also announced progress in its strategic partnership towards a renewable plastics facility.

Monash IVF rose 4.03 per cent on news it will expand its footprint into WA with the acquisition of the Pivet Medical Centre. Pivet has branches in Perth and Cairns. Monash will pay $9.4 million up-front. Further earn-out payments may follow.

Diagnostics firm AnteoTech jumped 30.32 per cent after European regulators registered an updated version of its Rapid Antigen Test for Covid-19.

Going down

As in the US, the consumer staples sector was the only laggard as investors reduced defensive hedging. Coles fell 0.75 per cent. Woolworths dropped 0.32 per cent. IGA operator Metcash slid 0.64 per cent.

Eagers Automotive declined 6.14 per cent after warning delays in obtaining new vehicles will dent its half-year result. Shareholders at today’s AGM heard supply had not kept pace with an increase in orders. Consequently, underlying profit was expected to fall to $183-$189 million this half from $214.8 million in H121.

Extreme rainfall on the east coast and rising energy prices prompted an earnings downgrade at Boral. The building materials supplier sank 3.58 per cent after warning underlying earnings were expected to be $45 million weaker than guidance provided just a month ago.

“Ongoing rainfall in many parts of the east coast, particularly in New South Wales and Queensland, has continued to significantly impact our sales volumes, while also resulting in additional costs,” CEO & Managing Director, Zlatko Todorcevski, said.

“This has coincided with further sharp increases in energy prices, particularly in coal and electricity, impacting our production and logistics costs.”

Other markets

US futures drifted lower during a mixed morning on Asian markets. The Asia Dow gained 0.2 per cent. Japan’s Nikkei rose 0.65 per cent. China’s Shanghai Composite shed 0.49 per cent and Hong Kong’s Hang Seng 0.66 per cent.

S&P 500 futures slipped five points or 0.12 per cent.

Oil recouped some of last night’s 2 per cent decline. Brent crude bounced 22 US cents or 0.2 per cent to US$112.15 a barrel.

Gold dropped US$7.90 or 0.4 per cent to US$1,811 an ounce.

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