Australian shares rallied for the first time in four sessions after Wall Street rebounded and China’s Premier forecast changes to Covid restrictions will help the economy regain momentum.
The S&P/ASX 200 climbed 38 points or 0.53 per cent to 7213. Today’s rally trimmed the index’s loss for the week to 80 points or 1.1 per cent.
Resource stocks led today’s advance on the prospect of a recovery in Chinese demand for Australian raw materials. Tech stocks, healthcare providers and most of the banks also rose.
What moved the market
A tough week ended on a positive note after Wall Street broke a five-session winning run. The S&P 500 bounced 0.75 per cent overnight as traders looking for a reason to buy the dip argued an uptick in claims for unemployment benefits might help slow the current frantic pace of interest rate rises.
The rally accelerated in afternoon trade after Premier Li Keqiang said China’s economy had reversed last quarter’s decline and was now stable. Chinese state media quoted Li as saying China was now looking to better balance its pandemic response against economic development. Reopening the economy was critical to people’s livelihoods, he said.
Li’s comments came a day after his nation’s health authorities announced major changes to pandemic restrictions representing the biggest shift yet from China’s draconian zero-Covid policy.
A positive session in Asia generated gains of 1.5 per cent for the Asia Dow, 1.64 per cent for Hong Kong’s Hang Seng, 0.08 per cent for China’s Shanghai Composite and 1.24 per cent for Japan’s Nikkei index.
Three losses through the middle of the week condemned the Australian market to its first weekly loss in three weeks. Wall Street was in the driving seat for much of the week, falling as robust economic data implied the top of this rates cycle may be further off than currently projected.
The US Federal Reserve meets next week and is widely expected to raise its benchmark rate by 50 basis points after four straight increases of 75 bp.
“Much depends now on what the Fed does in its meeting next week. There is a near consensus on a 50 bps hike, but if the Fed could take a more accommodative approach and go for a lighter 25 bps this month, it can be a bright side for equities,” Kunal Sawhney, chief executive of research group Kalkine, said.
“December is usually a positive month, but how can we expect investors to pay no attention to stubbornly hawkish central banks? Only a less hawkish Fed next week can give a strong push to the market and lead to a pre-Christmas rally.”
Winners’ circle
Beach Energy bounced 0.91 per cent after dropping out of the bidding war for control of Warrego Energy. The company announced it would not exercise its right to match a higher offer from Gina Rhinehart’s Hancock Energy, instead opting to concentrate on expanding its exploration program in the Perth Basin.
Warrego shares slipped 3.28 per cent to 29.5 cents after the board recommended the Hancock offer of 28 cents per share in the absence of a superior proposal. Major shareholder Strike Energy fell 8 per cent. Strike shares had jumped more than 50 per cent during the bidding war.
Fortescue Metals climbed 2.84 per cent to a six-month high after Chinese customs data showed iron ore imports increased 4.1 per cent last month as buyers prepared for a pick-up in steel demand. Rio Tinto gained 2.32 per cent. BHP added 2.7 per cent.
Yesterday’s best performer, Chalice Mining, put on another 3.81 per cent following promising assay results. Other miners to log solid gains were Sandfire +4.81 per cent, Champion Iron +5.15 per cent and Mineral Resources +3.1 per cent.
BlueScope Steel firmed 0.44 per cent despite the Federal Court finding the firm and a former manager guilty of cartel behaviour by attempting to fix flat steel product prices between 2013 and 2014.
“If successful, these attempts would have resulted in agreements between competitors which reduced price competition in the Australian flat steel market and increased prices for flat steel products which are widely used in Australia, ” ACCC Commissioner Liza Carver said.
“This is an important decision which we anticipate will clarify what constitutes ‘cartel conduct’. It has the potential to strengthen the ACCC’s hand in similar cases of attempted cartel conduct in the future,” she added.
Tech buyers were encouraged by a 1.13 per cent bounce in the Nasdaq Composite overnight. Afterpay’s US parent Block added 3.84 per cent, BrainChip 4.07 per cent and Megaport 4.03 per cent.
Nickel miner Mincor entered a trading halt while it sought to raise $60 million from investors to strengthen its balance sheet and accelerate drilling and mine development.
Doghouse
Investment manager Pinnacle slumped 3.77 per cent after warning performance fees had fallen significantly in the first half compared to the same period last year. After earning $6.4 million in 1H22, the group expects its net share of fees after tax this half to be less than $1 million.
McPherson’s dropped 2.82 per cent after ASIC launched civil proceedings accusing the beauty and wellness firm of misleading behaviour during a capital raising in 2020. The regulator said the firm failed to disclose material information and failed to correct misleading statements about its profit outlook.
The departure of CEO and Managing Director Dr Malcolm Parmenter after five years at the helm of Healius helped drive the medical diagnostics specialist’s shares lower before a late recovery. Current CFO Maxine Jaquet will replace Parmenter in March. Shares in the company finished flat after it also announced the sale of its Montserrat Day Hospitals for $138.6 million.
Other markets
S&P 500 futures ticked up eight points or 0.2 per cent as Asian markets extended gains.
Oil pushed for its first gain in six sessions. Brent crude bounced 50 US cents or 0.66 per cent to US$76.65 a barrel.
Gold lifted for a fourth day. The yellow metal firmed US$7.20 or 0.4 per cent to US$1,808.70 an ounce.
The dollar briefly regained 68 US cents, before paring its advance to 0.23 per cent at 67.91 US cents.
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