The share market secured its first weekly advance in three weeks as record iron ore prices carried the materials sector to an all-time high and broadly positive interim earning updates boosted the banks.
The S&P/ASX 200 rallied 19 points or 0.27 per cent this session to its fourth gain of the week.
The index touched a 14-month high on Wednesday before a setback yesterday after NSW imposed Covid restrictions and China closed a line of diplomatic communication. For the week, the index gained 55 points or almost 0.8 per cent.
What moved the market
The materials sector was this week’s standout, surging almost 4 per cent as iron ore cracked US$200 a tonne for the first time, copper touched a decade high and gold regained US$1,800 an ounce for the first time since February.
“China’s decision to indefinitely suspend economic dialogue with Australia, which is by far the largest source of iron ore for the country, delivered a significant push to iron ore prices lately, with its price exceeding US$200 a tonne,” Kalkine Group CEO Kunal Sawhney said.
“Aluminium and copper are also touching record highs amid demand-supply dynamics. China’s plans to limit its output to curb carbon emission as a part of 2060 net-zero commitment is seen to be exerting pressure on copper demand. Moreover, gold as an inflation hedge is also gaining traction driven by a weaker US dollar,” he added.
Gold giant Newcrest was the pick of the heavyweight miners today, rising 3.84 per cent. Rio Tinto rallied 1.07 per cent, Fortescue Metals 0.97 per cent and BHP 0.58 per cent.
The flipside of the surge in commodity prices has been a dramatic sell-off in sectors most exposed to valuation questions as inflation accelerates. The technology sector tumbled 10.5 per cent this week as sector leader Afterpay plunged. The BNPL leader touched its weakest level since November this morning before trimming its decline to 4.14 per cent.
A week of positive signals about the economy continued with an upgraded forecast from the Reserve Bank and an 18-year high in a measure of services sector activity. The Australian Industry Group’s Performance of Services Index climbed to 61 last month, the strongest reading since October 2003.
The RBA now expects GDP to grow 4.75 per cent this year and 3.5 per cent next year. Unemployment is expected to fall to 5 per cent by year-end and 4.5 per cent by mid-2023. Underlying inflation is not expected to pass 1.5 per cent this year before “gradually increasing to close to 2 per cent by mid 2023”.
Winners’ circle
Travel stocks that sold off yesterday after the NSW government announced restrictions to contain a Covid outbreak rebounded this session after the state reported no locally-acquired cases yesterday. NSW Premier Gladys Berejiklian earlier said she was “very pleased with how things are going”.
Webjet rallied 7.42 per cent, Flight Centre 7.26 per cent, Corporate Travel Management 6.31 per cent and Qantas 0.63 per cent.
The big four banks advanced in lockstep at the end of a week of broadly positive earning updates. CBA climbed 1.05 per cent to a six-year high. ANZ put on 0.36 per cent, NAB 0.83 per cent and Westpac 0.27 per cent.
News Corp marched up 4.76 per cent after CEO Robert Thomson forecast this financial year will be the strongest since the media group split in two in 2013. Third-quarter revenues increased by 3 per cent to $2.34 billion.
“The financial year is on a trajectory to be the most profitable since our reincarnation in 2013. This highlights the transformed character of the Company, with improved revenue performance and a 23 percent increase in profitability in the third quarter,” Mr Thomson said.
Tabcorp climbed 1.6 per cent to a three-year high after US investment firm Apollo Management entered the bidding war for the gaming group’s wagering and media business. Apollo matched UK bookie Entain’s $3.5 billion offer for the assets and threw down an alternative offer of $4 billion for the assets plus Tabcorp’s gaming services business.
An 8 per cent year-on-year increase in Q3 revenues helped lift REA Group 1.44 per cent. The online real estate listings group said earnings increased 13 per cent, fuelled by a booming property market.
Doghouse
A week to forget for investors in tech stocks ended with a sixth straight decline. Rampant commodity prices are a two-edged sword: a plus for miners but a negative for other sectors because of their inflationary implications. Tech stocks are seen as particularly vulnerable to reflation because valuations depend heavily on future earnings.
Nearmap lost 4.97 per cent, WiseTech 3.12 per cent, Altium 3.12 per cent and Nuix 2.97 per cent. Appen bounced 5.67 per cent, recouping some of yesterday’s 21.1 per cent dive.
Besides Afterpay, other losses at the heavyweight end of the market included CSL -0.86 per cent, Transurban -0.71 per cent and Telstra -0.29 per cent.
Macquarie Group eased 0.35 per cent after unveiling a 10 per cent increase in full-year net profit to $3.015 billion. The financial services giant raised its dividend to a fully-franked $3.35 per share, almost twice last year’s payment of $1.80.
“Macquarie’s businesses continued to perform well despite challenging market condition,” Managing Director and Chief Executive Officer, Shemara Wikramanayake, said.
Other markets
Asian markets trimmed gains as the Australian trading day wound down. The Asia Dow was last up 0.24 per cent. China’s Shanghai Composite eased 0.09 per cent. Hong Kong’s Hang Seng cut its rally to 0.25 per cent and Japan’s Nikkei to 0.09 per cent. S&P 500 futures edged up four points or 0.1 per cent.
Gold firmed $2.90 or 0.16 per cent to US$1,818.60 an ounce. Brent crude bounced 37 cents or 0.54 per cent to US$68.46 a barrel.
The dollar pared an overnight commodity-fuelled up-swing, retreating 0.16 per cent to 77.74 US cents.