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Commodity stocks powered the ASX to a third days of gains as the wider market continued to digest November’s heavy gains.

The S&P/ASX 200 climbed 25 points or 0.4 per cent. The materials sector hit a 12-year high.

What moved the market

A surge in iron ore prices lifted the mining giants to milestones. A champagne day for Andrew Forrest saw his Fortescue Metals soar 13.3 per cent to an all-time high. Rio Tinto climbed 6.9 per cent to its strongest level since the early months of the global financial crisis. BHP rose 4.9 per cent, a gain capped by the Big Australian’s exposure to a broader range of commodities.

The spot price for ore landed in China rose $3.70 or 2.8 per cent yesterday to a seven-year high of US$136.75 a tonne. Prices have almost doubled this year on strong demand from Chinese steelmakers. Data earlier this week showed Chinese factory activity expanded last month at its fastest rate since 2017.

“The stars kind of just aligned for Fortescue today,” ThinkMarkets Market Analyst Carl Capolingua said. “Obviously, iron ore prices were up overnight, tick. But that’s on the back of news that Brazilian competitor Vale is going to miss its full-year production target, double tick… So, when one of your main competitors is struggling, you’re able to keep pumping out product and the market is there for it, and prices keep going up, it’s about as good as you can get.”

The rally in resources helped offset a lacklustre session on Wall Street. The S&P 500 recovered late in the session to finish 0.18 per cent ahead at a record close. The Dow put on 0.2 per cent. The Nasdaq Composite declined 0.05 per cent.

US index futures were mixed in subdued trade today. S&P 500 index futures dipped five points or 0.1 per cent. Nasdaq futures edged up 0.1 per cent.

Winners’ circle

The top of the index read like a guide to the Australian resources industry. Besides the big three ore miners, Whitehaven Coal gained 8.8 per cent and Oz Minerals 6.5 per cent. Mining services firms Perenti Global and Mineral Resources put on 6.7 and 7.5 per cent, respectively.

Asset manager Platinum and pharmaceutical company Clinuvel were the only companies outside the mining industry to crack the top ten, rising 5.6 and 5.5 per cent, respectively. Iluka, Sandfire, South32 and Cooper Energy rounded out the day’s biggest winners.

Energy stocks were boosted by reports the OPEC oil cartel was close to agreeing to extend production curbs that propped up oil prices during the pandemic. Woodside Petroleum rose 1.9 per cent. Santos gained 0.8 per cent.   

Fast-expanding online retailer Kogan jumped 7.7 per cent on news it had acquired NZ gaming and toys online retailer Mighty Ape for $122.4 million. The acquisition brings access to 690,000 customers, as well as significant potential revenue and cost synergies.

Macquarie Group edged up 0.2 per cent after buying US-listed asset and wealth manager Waddell & Reed Financial for US$1.7 billion.


Beyond the resources space, the broader market continued to digest its biggest monthly advance since 1988. Insurer IAG fell 2.3 per cent, Wesfarmers 1 per cent, Coles 0.7 per cent and Telstra 0.7 per cent.

Westpac dropped 0.5 per cent after entering an enforceable undertaking with regulator APRA over risk management failings. CBA slid 0.7 per cent, ANZ 0.1 per cent and NAB 0.1 per cent.

The healthcare sector fell to its lowest level in almost a month, due in part to currency risks for several sector leaders, according to Capolingua. The dollar pushed above 74 US cents overnight, a headwind for companies that generate significant income in US dollars.

“If you’re a resources stock, as the Australian dollar appreciates, the drag in earnings from doing business in US dollars is offset by higher metals and energy prices. But, for healthcare stocks, the stronger Australian dollar is all downside,” he said.

Cochlear lost 1.5 per cent, CSL 0.7 per cent and ResMed 0.5 per cent. Fisher & Paykel shed 3.2 per cent as it traded without its dividend.

Qantas slipped 1.1 per cent after reporting domestic capacity recovered to 68 per cent of pre-Covid levels this quarter. The airline said it would come close to breaking even on underlying earnings this half.

Payments provider Splitit eased 2.7 per cent after reporting a 216 per cent bounce in merchant sales over the Black Friday/Cyber Monday weekend. Rival Afterpay dropped 2.4 per cent, Sezzle 3 per cent and Z1p Co 3 per cent.

Other markets

Asian markets continued a run of subdued sessions. China’s Shanghai Composite and Japan’s Nikkei both slipped around 0.1 per cent. Hong Kong’s Hang Seng gained 0.6 per cent.

Brent crude dipped five cents or 0.1 per cent to $US48.20 a barrel. Gold rallied $7.30 or 0.4 per cent to $US1,837.50 an ounce.

The dollar trimmed overnight gains, lately down 0.08 per cent at 74.08 US cents.

Hot today and not today

Hot today: Software-as-a-service provider AppsVillage (ASX:APV) doubled in value after announcing an advertising deal with millennials’ favourite TikTok. Under the deal AppsVillage business clients will have access to advertise on TikTok via APV’s JARVIS advertising campaign manager. TikTok and APV will share the ad revenue. The company said it expected revenues from the partnership to be “material” over time. The share price jumped 134.4 per cent.

Not today: Short-term speculators bailed out of Mongolian gas explorer Elixir Energy (ASX:EXR) after the company announced a Covid-driven early end to 2020 operations. Positive results from the latest well were overshadowed by news the company has suspended drilling until February. Mongolia has recently introduced restrictions to contain community transmission of the virus. With no prospect of a short-term news boost for the share price, some investors voted with their feet, sending shares down 16.7 per cent.

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