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Robust economic data helped drive the share market to fresh highs, led by energy stocks and bond proxies as crude rose and yields declined.
The S&P/ASX 200 hit an all-time high at 7281.8 before paring its advance to 32 points or 0.44 per cent at 7250.
The energy sector touched its strongest level since mid-April. Afterpay, property giant Goodman, banks and supermarkets advanced. Resource stocks were mixed following a soft session in the US.
What’s driving the market
The share market’s push into unchartered territory has gathered pace this week after the Reserve Bank reaffirmed its commitment to hold the official lending rate at a record-low even as report after report underscored the strength of the economy. The S&P/ASX 200 poked its head above 7200 for the first time on Monday and at today’s peak had risen more than 130 points in two sessions.
“The GDP figures yesterday were remarkably strong… with the level of GDP now 0.8% above pre-pandemic levels,” NAB Senior Economist and Director David de Garis said. “The data adds to the evidence of a strong rebound in the economy and should prompt questions around the appropriateness of current unconventional policy settings.”
This morning’s reports continued the market-friendly trend. The services sector expanded sharply last month, albeit at a fractionally slower rate than April. The IHS Market Services Business Activity Index eased to 58 from 58.8. Firms increased their workforces at a record pace. Input prices and output charges “saw steep increases”.
“Both demand and business activity [grew] at a healthy pace. The improvement in economic conditions can be seen providing firms with better confidence to continue hiring at a record pace,” IHS Markt Economics Associate Director Jingyi Pan said.
Other reports showed the Australian Industry Group’s manufacturing gauge hovering near record levels, retail sales expanding 1.1 per cent and the trade surplus growing to $8.03 billion.
Victoria reported just three new locally-acquired cases of Covid-19 a day after extending a lockdown in Greater Melbourne for seven days from midnight tonight.
Chief Health Officer Brett Sutton said, “The trend is good. The last 48 hours have seen more people who are not infectious in the community. That’s a really good sign.”
US stocks inched higher overnight in subdued trade ahead of major economic releases tonight and tomorrow. The S&P 500 and Nasdaq both gained 0.14 per cent. The Dow rose 25 points or 0.07 per cent.
Going up
The energy sector surged 2.7 per cent to a seven-week high as crude probed fresh two-year highs. Santos climbed 2.51 per cent, Woodside 2.72 per cent and Oil Search 2.33 per cent.
Growth stocks and bond proxies advanced as the yield on ten-year Australian government bonds dropped three basis points. Goodman Group rallied 1.21 per cent to a post-GFC high. Supermarkets Woolworths and Coles put on 1.06 and 0.42 per cent, respectively. AGL Energy climbed 3.47 per cent.
The big four banks shrugged off the decline in lending rates and a tepid night for US financials. CBA rose 0.79 per cent to a new record. ANZ advanced 1.27 per cent, NAB 0.78 per cent and Westpac 0.97 per cent.
Bega Cheese inched up 0.17 per cent after resoling a long-running legal dispute with multinational Kraft Heinz. The US giant will pay Bega’s legal costs, ending a tiff over the Australian company’s right to use distinctive peanut butter packaging.
US-focussed BNPL player Sezzle surged 22 per cent on news of a three-year deal with US retail giant Target. Sezzle’s offering will be used in-store and across digital platforms. Z1p Co climbed 4.37 per cent. Afterpay added 1.68 per cent.
Mining and engineering services group Worley was the index’s best performer, rising 8.85 per cent a day after laying out an optimistic future for the company’s shift to working with greener energy sources.
A production upgrade lifted lithium miner Galaxy Resources 0.88 per cent.
Going down
Wesfarmers declined 1.9 per cent after warning growth had moderated following last year’s Covid-fuelled buying spree. The retail conglomerate said some businesses had seen business contract. Online penetration had eased but remained above pre-Covid levels.
Many of the mining majors took a breather following yesterday’s surge. Rio Tinto gave back 0.24 per cent. Newcrest dipped 0.39 per cent. Fortescue and BHP overcome early weakness to advance 0.62 and 0.2 per cent, respectively.
Other markets
A broadly positive morning on Asian markets saw the Asia Dow rise 0.75 per cent and Japan’s Nikkei add 0.37 per cent. China’s Shanghai Composite faded 0.07 per cent. Hong Kong’s Hang Seng slid 0.18 per cent
S&P 500 futures advanced two points or 0.05 per cent.
Oil continued to build on this week’s gains. Brent crude firmed 48 cents or 0.67 per cent to US$71.83 a barrel.
Gold dipped $1.40 or 0.07 per cent to US$1,908.50 an ounce.
The dollar receded 0.08 per cent to 77.38 US cents.
