The share market rose for a fifth day as gains in mining and banking companies outweighed declines in growth stocks.
The S&P/ASX 200 climbed 40 points or 0.54 per cent by mid-session. The advance extended a rally that has lifted the Australian benchmark more than 6.5 per cent in less than three weeks.
Iron giants BHP, Rio Tinto and Fortescue Metals led the advance, with support from the big four banks. CSL, Telstra and James Hardie were among the drags.
What’s driving the market
Investors found enough positives in Friday’s market action to ignore retreats in US equity futures and crude oil this morning. Miners were boosted by a rally in iron ore back above US$150 a tonne. The financial sector was lifted by a jump in long-term lending rates.
US stocks finished mixed but mostly higher on Friday as the market divided into winners and losers from turmoil in bond markets. The S&P 500 put on 0.51 per cent and the Dow 0.44 per cent. The Nasdaq dipped 0.16 per cent.
US yields have surged this year amid expectations official rates will have to go sharply higher very quickly to contain soaring inflation.
“Carnage is one word to describe Friday’s moves which saw bond yields surge as US economists tried to outdo each other with rate hike calls,” NAB Director, Economics, Tapas Strickland, said.
“Fed Funds Pricing has lifted materially with 8.2 rate hikes now priced for the remaining six meetings in 2022, from 7.7 hikes on Thursday. Consecutive 50bp moves in May and June is now almost fully priced at 87%,” he added.
Just as in the US, borrowing-dependent ASX growth stocks struggled as long-term lending rates reached their highest since June 2018. The yield on ten-year Australian government bonds touched 2.876 per cent this morning.
The market ignored a dip in US equity futures. S&P 500 futures dropped 17 points or 0.36 per cent.
Crude oil also pulled back. Brent crude retreated US$3.88 or 3.2 per cent to US$116.77 a barrel.
Going up
Index heavyweight BHP climbed 2.21 per cent to a seven-month high as a rally in iron ore continued. The spot price for ore landed at Tianjin climbed back above US$150 a tonne on Friday amid reports of shortages at steel mills.
Rio Tinto put on 1.7 per cent, Fortescue Metals 0.93 per cent and Champion Iron 2 per cent. Lynas Rare Earths gained 4.06 per cent, Iluka 2.26 per cent and Mineral Resources 2.2 per cent.
The major banks also traded near multi-month highs on the prospect of better returns as rates normalise. CBA tacked on 0.74 per cent, ANZ 0.83 per cent, NAB 1.45 per cent and Westpac 1.01 per cent.
AMP inched up 0.26 per cent after completing the sale of its global equities and fixed income business to Macquarie Asset Management. The sale brings the wealth manager a step closer to demerging its private-markets investing business.
Star Entertainment inched up 0.15 per cent after a review into The Star Sydney casino claimed its first scalp. Managing Director and CEO Matt Bekier resigned after a week of damaging allegations regarding the enforcement of anti-money laundering laws at the casino.
Bekier told the board he was accountable for the company’s “processes, policies, people and culture”. He said “the right thing to do was for him to take responsibility”.
At the speculative end of the market, Tempest Minerals tripled in value after striking visible copper sulphide mineralisation in Western Australia. The first hole at the miner’s untested Orion Target in the Yalgoo region intersected semi-massive sulphides. The share price surged from 2.3 cents to 7.2 cents, a rise of 213 per cent.
“This is a spectacular outcome,” Managing Director Don Smith said. “To make a new discovery on our very first hole into an entirely untested region far exceeds our expectations.”
Going down
Gold Road Resources eased 1.92 per cent after a fall in full-year profit prompted a dividend cut. The gold miner’s net profit contracted by 44 per cent to $36.8 million. Shareholders will receive 0.5 cents per share, half last year’s payment.
A cut to production guidance pulled St Barbara down 3.29 per cent. The miner said a Covid outbreak had hampered its ability to ramp up production at the Simberi mine in Papua New Guinea. Full-year production was expected to be roughly half previous expectations.
Construction group CIMIC looked set to accept a takeover bid from majority shareholder Hochtief after an Independent Board Committee recommended the offer as fair and reasonable.
The offer price of $22 per share fell in the middle of the Independent Expert’s takeover “market value” range of $19.26 – $25.05. The share price dipped 0.11 per cent to $22 as the market discounted the likelihood of a better offer.
The morning’s worst performers were companies whose valuations were marked down on increased borrowing costs. Xero fell 4.24 per cent, Polynovo 4.05 per cent, Block 3.89 per cent and Tyro Payments 3.71 per cent.
At the heavyweight end, James Hardie shed 1.94 per cent, CSL 0.75 per cent and Telstra 0.64 per cent.
Other markets
Asian markets started the week on the back foot. The Asia Dow fell 0.58 per cent, China’s Shanghai Composite 1.17 per cent, Hong Kong’s Hang Seng 0.2 per cent and Japan’s Nikkei 0.86 per cent.
Gold declined US$4.40 or 0.23 per cent to US$1,949.80 an ounce.
The dollar eased 0.17 per cent to 75.04 US cents.
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