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The share market extended its advance for the week as gains in tech and defensive sectors outweighed declines in energy and financials.
The S&P/ASX 200 swung to a gain of 30 points or 0.46 per cent by mid-session. The rally kept the benchmark on track for its first weekly rise in three weeks.
Rate-sensitive tech stocks and bond proxies climbed as the cost of long-term borrowing continued to retreat. Declines in copper and crude oil kept a lid on commodity stocks.
What’s driving the market
A mixed market included sector moves in both directions after commodity prices slid and a bond market rally accelerated. Copper miners fell after the “metal with the degree in economics” plunged to a 16-month low. The materials sector touched its weakest level since November before reversing as Chinese iron prices improved for a second day.
US stocks rose overnight as the bond yields wilted. The S&P 500 rallied 0.95 per cent, keeping it on course for a positive week.
A recovery on bond markets has helped equity markets steady in recent sessions. This week’s Australian bond market rally is the strongest in a decade, according to Bloomberg. The yield on ten-year government bonds has plunged 45 basis points. (Yields move inversely to prices.) A fall of that scale would be the largest weekly decline since August 2011.
There are several reasons why that matters for stock investors. Lower yields make the returns offered by stock dividends more compelling. Cheaper borrowing costs also benefit the bottom line of companies that borrow to fund growth. Lenders, however, lose the opportunity to expand margins.
Thus, the Australian financial sector declined this morning, while tech stocks, REITs, healthcare and consumer staples rallied.
“The recent fall in bond yields seems to be faring well for tech companies that mainly depend on borrowed money to fuel their growth. Australian bond yields slumped today as weak economic data from Europe and the US added to recessionary fears,” Kalkine Group CEO Kunal Sawhney said.
“Defensive sectors like healthcare and consumer staples, which might not see much pressure of a recession on their earnings, also gained this morning.”
Going up
The tech sector climbed 4.7 per cent to its highest in more than a week after the Nasdaq Composite led US gains overnight. Biotech Imugene soared 14.29 per cent, app-maker Life360 16.18 per cent and network provider Megaport 11.8 per cent.
The beaten-down buy now, pay later sub-sector enjoyed a rare day in the sun. Zip Co bounced 14.2 per cent. Afterpay parent Block put on 10.78 per cent. Sezzle soared 9.43 per cent. Splitit gained 9.09 per cent.
Lithium miners rebounded from days of heavy selling pressure. Lake Resources bounced 17.14 per cent. Liontown gained 11.65 per cent, Pilbara Minerals 7.8 per cent and Core Lithium 9.52 per cent.
A cash injection from European carmaker Stellantis lifted lithium junior Vulcan Energy 30.4 per cent. Stellantis will pay $76 million for an eight per cent stake in Vulcan, making it the miner’s second-largest shareholder. The companies have an offtake agreement to 2035.
At the heavyweight end, property giant Goodman firmed 1.71 per cent, retail conglomerate Wesfarmers 1 per cent, biotech CSL 0.74 per cent and supermarket Coles 0.85 per cent.
Qantas tacked on 0.11 per cent on news the airline’s debt levels continue to improve as travel volumes picked up. Net debt will fall from $6.4 billion at the peak of the pandemic to around $4 billion by the end of this month. Full-year underlying earnings were on track to be between $450 and $550 million.
Gaming software group BetMakers bounced 23.33 per cent off a two-year low on news of an on-market share buyback. The company will buy back up to ten per cent of issued capital from July 12.
Going down
Energy was the morning’s worst performer in the wake of Brent crude’s six-week low. Oil prices have come off sharply this week, along with other commodities, as traders anticipate weaker demand as the global economy slows.
Woodside Energy eased 1.53 per cent, Santos 1.36 per cent and Viva Energy 3.19 per cent. Ampol shed 2.09 per cent.
Declines in industrial metals helped drag South32 down 1.36 per cent. Rio Tinto lost 0.79 per cent, BHP 0.72 per cent and Fortescue Metals 0.2 per cent.
Agribusinesses Nufarm and Elders gave up 1.87 and 1.78 per cent, respectively. Prices for wheat and oats have declined this week with other “soft” commodities.
Skincare product manufacturer BWX entered a trading halt, pending a trading update.
Other markets
US futures were boosted by a positive morning on Asian markets. The Asia Dow lifted 0.42 per cent. China’s Shanghai Composite tacked on 0.67 per cent, Hong Kong’s Hang Seng 1.08 per cent and Japan’s Nikkei 0.74 per cent.
S&P 500 futures climbed 18 points or 0.46 per cent.
Oil remained under pressure. Brent crude slipped 40 US cents or 0.37 per cent to US$106.06 a barrel.
Gold declined for a fifth session, sliding US$3.90 or 0.2 per cent to US$1,825.90 an ounce.
The dollar firmed 0.04 per cent to 69.05 US cents.
