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The share market recouped almost two days of falls after a recovery in bond yields soothed concerns about a global economic slowdown as the delta variant fuels a resurgence of Covid-19.

The S&P/ASX 200 bounced 75 points or 1.03 per cent by mid-session. The recovery reversed all but 20 points of the decline since the start of the week.

A broad rally lifted all 11 ASX sectors. Wesfarmers, Afterpay and Macquarie Bank were the pick of the heavyweights. Support came from the miners and high-street banks.

What’s driving the market

US and European stocks rebounded overnight as bond yields bounced off five-month lows. A day after its worst fall in nine months, the Dow surged 550 points or 1.62 per cent to its best gain in four weeks. The S&P 500 rallied 1.52 per cent. Europe’s Stoxx 600 put on 0.52 per cent.

US stocks plunged on Monday as a relentless decline in yields suggested bond traders were much more pessimistic about global growth than record equity valuations implied. Also unsettling markets: a resurgence in Covid-19 cases as the highly-contagious delta variant spread through the US.

“Treasury yields rebounded strongly on Tuesday after falling to their lowest level in five months a day before,” Kalkine Group CEO Kunal Sawhney said. “Much like the equity market, the uptick in bond yields suggests a shift in investors’ focus away from virus fears.

“It seems that investors are re-evaluating their long-term economic outlook and eyeing a relatively later start to the central bank’s monetary policy tightening. Speculations are rife that the US Federal Reserve may keep supporting the economy with ultra-easy monetary policy amid an uptick in global COVID-19 cases. For this reason, the markets appear to have pushed back expectations for an accelerated tightening cycle.” 

New South Wales this morning reported 110 new local cases in the 24 hours to 8pm last night. Forty-three of those cases were infectious while in the community. Victoria reported 22 new local cases.

“Retail, hospitality, travel, and entertainment businesses are likely to be among the hardest-hit sectors from the lockdown,” Kalkine’s Mr Sawhney said. “At a time when most of the support schemes have already come to an end in March, business owners are eagerly looking up to the government for financial support.”

A report this morning showed retail spending declined 1.8 per cent last month as lockdowns bit. Australians spent $575.1 million less than in May, according to seasonally-adjusted figures produced by the Australian Bureau of Statistics. Victoria and NSW saw the biggest downturns as both were affected by lockdowns.

Going up

The falling tide that lowered nearly all boats yesterday came rushing back in this session. The banks rallied even as a tentative recovery in bond yields faltered. Macquarie Group put on 1.49 per cent, CBA 0.46 per cent, ANZ 1.32 per cent, NAB 1.28 per cent and Westpac 0.9 per cent.

Mining giants BHP and Rio Tinto gained 1.12 and 1.22 per cent, respectively. Fortescue Metals added 0.62 per cent.

Wesfarmers continued to break fresh ground, lifting 2.45 per cent to a fourth straight gain and a new record. Afterpay advanced for a third session, adding 1.56 per cent.

South32 edged up 1.07 per cent as record quarterly production of alumina and manganese helped offset news of a US$728 million charge against its Illawarra coal assets. The pre-tax impairment reflects a reduction in the carrying value of the assets after NSW government rejected an application to extend the life of the Dendrobium Next Domain coal mine.

Lendlease advanced 2.36 per cent on news Service Stream will buy its Services business for $310 million. Global CEO Tony Lombardo said the divestment aligned with the group’s focus on “areas where our competitive edge is the strongest”. Service Stream shares entered a trading halt while the company taps investors for $185 million to help fund the acquisition.

An upsurge in new work and the restoration of an interim dividend helped construction group Cimic climb 5.26 per cent. The company announced an interim dividend of 42 cents per share following a half-year net profit of $208 million. The company said it had won $10.4 billion in new work already this year, eclipsing last year’s full-year total of $6.8 billion.

Going down

Software maker Altium declined for a fourth session after would-be suitor Autodesk confirmed it had abandoned its takeover attempt. Autodesk CEO Andrew Anagnost said the companies were “unable to agree on the basis to advance discussions”. Altium shares that traded above $38 when the bid was launched fell 3.76 per cent this morning to $33.25.

Gold mining was one of the few pockets of the market to miss the uplift. Westgold shed 1.9 per cent, Evolution 2.15 per cent and Newcrest 0.52 per cent.

Toll road operator Atlas Arteria eased 0.08 per cent on news traffic volumes remained well below pre-pandemic levels despite an improvement last quarter. Second-quarter volumes were 68.5 per cent higher than the same period last year, but 18.9 per cent weaker than the corresponding period in 2019.

Beach Energy shed 1.2 per cent after reporting a dip in production last quarter. A 10 per cent increase in pricing helped lift revenues 7 per cent to $421 million.

Kogan faded 0.26 per cent after hitting a three-week high on news of a pick-up in sales, earnings and profits last month. The online retailer said it had largely cleared a build-up in inventory, reducing warehousing costs and more accurately reflecting demand.

Other markets

Asian markets pared gains as the session wore on. The Asia Dow trimmed its advance to 0.29 per cent. China’s Shanghai Composite added 0.39 per cent and Japan’s Nikkei 0.5 per cent. Hong Kong’s Hang Seng faded to a loss of 0.66 per cent.

S&P 500 futures drifted down two points or 0.04 per cent.

Oil resumed its downtrend after a brief uplift overnight. Brent crude dropped 53 cents or 0.76 per cent to US$68.82 a barrel.

Gold declined $3.60 or 0.2 per cent to US$1,807.80 an ounce.

The dollar fell towards 73 US cents following the retail sales disappointment. The Aussie was last down 0.41 per cent at 73.08 US cents.

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