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The new trading week got off to a bright start as upbeat US index futures encouraged investors to dip their toes at ten-week lows.
The S&P/ASX 200 rallied 35 points or 0.6 per cent to recoup most of Friday’s 49-point loss. The benchmark local index shed 1.1 per cent during a fourth straight losing week as the Nasdaq plunged 4.1 per cent to its worst weekly decline since March.
What’s driving the market
US index futures climbed this morning, raising hopes the weekend may act as a circuit-breaker after last week’s brutal selling. S&P 500 index futures climbed 37 points or 1.1 per cent. Nasdaq futures bounced 149 points or 1.3 per cent, hinting at a strong reversal of Friday’s 0.6 per cent decline.
Sentiment towards US tech stocks was boosted by weekend news computer chipmaker Nvidia bought chip-designer Arm Holdings for US$40 billion from SoftBank, the Japanese multinational rumoured to have fuelled the extravagant rally in US tech stocks since March. Softbank soared 9 per cent this morning on the news.
Also helping sentiment was a two-month low in new coronavirus cases in Victoria: the state recorded 35 new cases, following tallies of 41 yesterday and 37 on Saturday. The 14-day moving average in Melbourne declined to 56.9. New South Wales recorded four new cases and Queensland zero.
Going up
Local action mirrored Wall Street: materials, industrials and financials up; tech and consumers stocks down.
A sharp rebound in iron ore fuelled gains in the big miners. Rio Tinto jumped 4.1 per cent, BHP 2 per cent and Fortescue Metals 1.9 per cent. Gold miner Newcrest put on 3.3 per cent.
Gains in the financial sector were crimped by a 4.3 per cent slump in Macquarie Group after the company warned it expects its first-half result to fall 35 per cent from the same period last year amid challenging conditions. The bank said the pandemic uncertainty meant it was unable to provide meaningful earnings guidance for the full year. The big four banks gained between 0.1 and 1.3 per cent.
Energy was among the best of the sectors, climbing 1.5 per cent. Woodside Petroleum and Santos rebounded 1.7 per cent from Friday’s multi-month lows.
Recovery plays – market laggards yet to recoup their pandemic losses – enjoyed a strong morning. Flight Centre rose 6.7 per cent, Star Entertainment 5.9 per cent, Southern Cross Media 5.2 per cent, G8 Education 3.3 per cent and Qantas 2.5 per cent.
Shipbuilder Austal climbed 3.5 per cent after announcing it had expanded its American footprint by buying additional land, buildings and a dry dock near its facilities in Alabama for less than US$10 million. Constructions material supplier Boral rose 0.5 per cent on news Kerry Stokes had increased his holding to almost 20 per cent through his Seven Group Holdings vehicle. Seven Group gained 4.5 per cent.
Going down
The top three technology stocks declined as the local sector continued to get dragged lower in the Nasdaq’s slipstream. Xero gave up 1.7 per cent nd WiseTech 1 per cent. Afterpay skidded 3.5 per cent as investors continued to take a heavy stick to buy now pay later companies. Laybuy Group slumped 8.6 per cent, Openpay 7.1 per cent, Sezzle 6.7 per cent to a two-month low, Z1P 4.3 per cent and Splitit 5.1 per cent.
Among consumer stocks, A2M Milk shed 0.9 per cent, Wesfarmers 0.6 per cent and Woolworths 0.4 per cent.
Cleanaway tumbled 7.7 per cent after addressing media reports of toxic workplace behaviour at the waste management firm. The company said Chief Executive Vik Bansal had expressed contrition and embraced change. The board implemented an executive mentoring program and increased reporting and monitoring. A separate announcement said Chief Financial Officer Brendan Gill would retire.
Other markets
Asian markets outpaced Australian gains. China’s Shanghai Composite put on 0.6 per cent, Hong Kong’s Hang Seng 0.8 per cent and Japan’s Nikkei 0.7 per cent.
Gold reversed much of Friday’s fall, bouncing $10.30 or 0.5 per cent to $US1,958.20 an ounce. Brent crude rose 17 cents or 0.4 per cent to $US40 a barrel.
The dollar inched up 0.03 per cent to 72.84 US cents.
What’s hot today and what’s not
Hot today: Antiviral manufacturer Starpharma (ASX:SPL) has been one of the big winners from the pandemic amid signs its nasal spray is effective against Covid-19. The share price jumped 8.2 per cent today on further test results from the US. The company said SPL7013 inactivated more than 99.9 per cent of SARS-CoV-2, the virus that causes Covid-19. CEO DR Jackie Fairley said the company aimed to have a product ready for market in the first half of next year.
Not today: Disappointing results from a clinical trial for an experimental treatment for diabetic kidney disease cost biotech Dimerix (ASX:DXB) more than half its market value. The share price crashed 60.1 per cent despite the company’s best attempts to dress up the Phase 2 study results as “positive”. The key sentence in the report acknowledged the trial found “no conclusive benefit of DMX-200 compared to placebo across the entire cohort of diabetic kidney disease patients” tested.
