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The share market climbed to its highest in more than a week as rising US futures and progress towards reopening the country sharpened hopes for a positive end to a weak month.
The S&P/ASX 200 rallied 57 points or 0.77 per cent by mid-session. Today’s advance was the index’s fourth in five sessions.
The heavyweight miners and banks provided momentum as the repairwork continued following three weeks of steady decline. The index remained on track for its first losing month since last September.
What’s driving the market
Investors took their cues from a rally in US equity futures following a mixed end to last week. S&P 500 futures firmed 20 points or 0.45 per cent, hinting at a positive start to the week on Wall Street.
The major indices finished mixed but little changed on Friday. The S&P 500 and Dow rose 0.15 and 0.1 per cent, respectively. The Nasdaq eased 0.03 per cent.
Australia played catch-up after Wall Street broke a three-week losing run. The Dow and S&P 500 ended 0.5-0.6 per cent ahead for the week. In contrast, the ASX 200 lost 0.8 per cent, extending a month-long run of declines.
“Equity markets continue to reflect a tug-of-war between bulls and bears,” Mark Hackett, chief of investment research at Nationwide, said. “The [US] market recovery indicated that the buy-the-dip mentality remains.”
Optimism over the reopening of the economy was heightened by the lowest number of new Covid cases in NSW in more than a month and by a vaccination milestone. The state recorded just 787 new cases, the least since August 24, and passed the 60 per cent double-dose mark.
“In Australia, ‘Freedom Day’ is getting closer,” NAB Head of FX Strategy Ray Attrill said. “NAB’s latest analysis is 70% adult vaccination in NSW could be reached by October 5 with the NSW government briefing business that October 11 will be Freedom Day… Victoria should reach the 70% hurdle around October 20,” he added.
Several travel and tourism companies hit pandemic-era peaks. Qantas surged 3.46 per cent to its strongest since last February 2020. Flight Centre soared 7.73 per cent, Webjet 3.91 per cent and Corporate Travel Management 2.81 per cent.
Going up
A third day of rebound gains for iron ore helped lift the major producers further from last week’s multi-month lows. Fortescue Metals rallied 4.69 per cent, Rio Tinto 2.14 per cent and BHP 0.9 per cent. Woodside Petroleum firmed 2.46 per cent as oil neared a fresh three-year high.
A spike in lending rates last week helped lift Commonwealth Bank 2.46 per cent to its highest in seven weeks. ANZ firmed 1.35 per cent, NAB 0.99 per cent and Westpac 0.99 per cent. The yield on ten-year government bonds jumped above 1.4 per cent last week for the first time since early July.
Australian Pharmaceutical Industries (API) rose 4.44 per cent to a 17-month peak after Sigma Healthcare topped Wesfarmers’ bid for the pharmacy giant. Sigma offered a mix of cash and scrip valuing each API share at $1.57. Wesfarmers offered $1.55 per share earlier this month.
Under Sigma’s “conditional, non-binding indicative proposal”, API shareholders would emerge with 48.8 per cent of the merged company, plus 35 cents cash per share. Sigma shares firmed 2.52 per cent. Wesfarmers inched up 0.19 per cent.
Ampol added 0.61 per cent after securing another two weeks to thrash out a takeover of New Zealand’s Z Energy. The original four-week window to carry out due diligence has been extended.
Kiwi dairy company Synlait rallied 4.35 per cent on news former Fonterra senior executive Grant Watson will join as CEO. The company said it expects a rebound in profitability this year after full-year net profit collapsed 138 per cent in FY21 to a record loss of NZ$28.5 million.
Construction group Cimic gained 1 per cent after securing a multi-year contract to provide engineering and maintenance to BP fuel terminals across Australia.
Going down
Healthcare and technology – two sectors that prosper when bond yields are low – were the morning’s biggest losers. Health heavyweight CSL shed 1.3 per cent and Fisher & Paykel Healthcare 1.08 per cent. Afterpay eased 1.1 per cent, Nextdc 3.35 per cent, Megaport 1.52 per cent and Appen 1.45 per cent.
Other bond proxies to lose altitude included Atlas Arteria -1.2 per cent, Vicinity Centres -0.9 per cent, Omni Bridgeway -0.85 per cent and Woolworths -0.59 per cent.
The uranium sub-sector retreated in the wake of sharp falls in US peers on Friday. Alligator Energy dropped 11.84 per cent, Toro Energy 10.61 per cent, Deep Yellow 9.68 per cent and Paladin 8.43 per cent.
Other markets
A broadly positive session on Asian markets saw the Asia Dow up 0.7 per cent, Hong Kong’s Hang Seng 0.83 per cent and Japan’s Nikkei 0.34 per cent. China’s Shanghai Composite retreated 0.44 per cent.
Oil rose for a fifth session. Brent crude climbed 97 US cents or 1.26 per cent to US$78.20 a barrel.
Gold rallied US$7 or 0.4 per cent to US$1,758.70 an ounce.
The dollar firmed 0.29 per cent to 72.86 US cents.
