Australian shares rose for the first time in three sessions as the start of the interim earnings season provided a distraction from interest rate worries.
The S&P/ASX 200 rallied 26 points or 0.35 per cent to 7530.
The heavily-weighted banks and miners provided much of the day’s momentum. Building stocks and insurers rose after well-received trading updates from Boral and Suncorp. Traditional defensive sectors dragged.
What moved the market
The market moved on from yesterday’s rate-hike slump as the spotlight switched to corporate earnings. The first busy day of the new season produced bouquets for Boral and Suncorp, and brickbats for Amcor, BWP Trust and Dexus Industria.
Today’s rally broke a two-session losing run triggered by signs interest rates may be going higher on both sides of the Pacific than the market had priced in. The ASX 200 skidded 0.46 per cent yesterday to its heaviest loss since January 3 after the RBA raised the cash rate target to 3.35 per cent and indicated more hikes to come.
Market pricing for the terminal rate, or top of this cycle, rose to 3.98 per cent this afternoon, suggesting another 63 basis points of hikes by August.
Stateside, stocks trimmed a strong start to the year after a surge in employment forced investors to reassess the likely top for this rates cycle. The S&P 500 rebounded overnight after Federal Reserve Chair Jerome Powell said the bank had made progress on reining in inflation.
“Wall Street reacted positively… to a mix of sentiments, which included Powell mentioning ‘disinflationary process has begun’, and some big names like Microsoft and Boeing rose on company-specific news. This has helped the ASX 200,” Kunal Sawhney, chief executive of research group Kalkine, said.
Winners’ circle
Boral jumped 12.07 per cent to a 12-month high after “cost discipline” and price increases fuelled a turnaround at the construction materials supplier. Underlying first-half profit increased 53 per cent as margins improved 20 basis points.
“It is promising to see our pricing actions gain traction,” new CEO Vik Bansal said.
Rival building stocks Adbri and Fletcher Building climbed 4.35 and 1.43 per cent, respectively. CSR lifted 0.96 per cent. Brickworks edged up 0.37 per cent.
Increases in insurance premiums helped Suncorp lift first-half net profit by 44.3 per cent. The insurer saw premium growth of 9 per cent in Australia and 12.2 per cent in New Zealand. Operating expenses declined 3.1 per cent. The share price rallied 4.57 per cent.
Insurance Australia Group firmed 2.78 per cent. QBE gained 0.75 per cent.
Flight Centre rallied 2.82 per cent to a seventh straight advance after completing the acquisition of UK luxury travel business Scott Dunn.
Fortescue Metals tacked on 1.95 per cent after signing a Mining Convention with the government of Gabon to allow production to start at its Belinga project in Gabon. The company aims to commence mining in the second half of the year.
Macquarie Group rallied 2.57 per cent to a nine-month high following yesterday’s trading update. The big four high-street banks gained between 0.02 and 1.04 per cent.
Gold miner Newcrest climbed for a third day since receiving a takeover offer from US giant Newmont, gaining 2.61 per cent.
Doghouse
Packaging company Amcor slid 3.3 per cent as a cautious demand outlook overshadowed a 6 per cent increase in first-half sales. The company maintained its full-year adjusted earnings and cash flow guidance but warned it saw “some softening in the demand environment and customer destocking through the December quarter”.
A sharp contraction in first-half net profit as property values declined drove Dexus Industria down 0.33 per cent. Statutory net profit shrank to $1.4 million from $113.7 million in the prior corresponding period as the company marked down the value of its investment properties by $34 million. The trust reaffirmed its full-year guidance.
BWP Trust shed 1.02 per cent as first-half net profit declined by 68 per cent to $111.3 million. The trust maintained its interim distribution at 9.02 cents.
Elders was the index’s worst performer a day after briefing institutional investors. The agribusiness slumped 5.86 per cent to its weakest level since May 2020. The company denied discussing any price-sensitive information.
Traditional defensive assets were out of favour. Diagnostic imaging company Healius shed 5.37 per cent, brewing supplier United Malt 4.05 per cent and fruit and veg seller Costa Group 3.62 per cent.
The rate-sensitive REIT sector fell for a third day. Region Group lost 3.37 per cent, Centuria Capital 2.69 per cent and Waypoint REIT 1.43 per cent.
Other markets
A subdued session on Asian markets saw the Asia Dow edge up 0.15 per cent and Hong Kong’s Hang Seng add 0.27 per cent. China’s Shanghai Composite dipped 0.05 per cent. Japan’s Nikkei lost 0.4 per cent.
S&P 500 futures were little changed at the Australian close, down one point or 0.02 per cent.
Oil added to last night’s 3.3 per cent advance. Brent crude put on seven US cents or 0.1 per cent at US$83.76 a barrel.
Gold rose for a third session. The yellow metal firmed US$4.50 or 0.24 per cent to US$1,889.30 an ounce.
The dollar was steady at 69.63 US cents after rebounding almost 1 per cent overnight.