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The share market edged towards its first gain of the week as strength in bank stocks and bond proxies offset pressure on miners.
The S&P/ASX 200 rallied 14 points or 0.2 per cent. The advance reversed most of yesterday’s 18-point decline.
The big four banks provided momentum, supported by traditional defensives. Afterpay and the major bulk metal miners declined.
What’s driving the market
Buying interest remained despite an end to Wall Street’s eight-session win streak overnight. Defensive sectors such as utilities, REITs and consumer staples attracted a bid as investors favoured havens against any looming downside.
“Sentiment in the market seems to have shifted a touch,” the head of research at Pepperstone, Chris Weston, said.
“Granted, the S&P500 had risen for 8 straight days, so a 0.4% fall doesn’t seem that out of place – there has been no real panic, but the demand for downside equity index hedges from funds has picked up and we see the VIX index +0.56 vols into 17.8%, with traders buying S&P500 1-month put volatility more aggressively.”
Wall Street succumbed to profit-taking at the prospect of a genuine contest to lead the Federal Reserve. President Joe Biden interviewed Lael Brainard for the position ahead of the expiry of Jerome Powell’s term as Chair in February.
“Powell’s active and focused approach during the pandemic and unprecedented economic help could rule in his favour,” Kalkine Group CEO Kunal Sawhney said.
“However, some analysts believe that the chances of Powell’s win have been dented by revelations of stock trading by some senior central bank officials last year. The recent ethics scandal at the Fed is believed to have undermined confidence in the institution’s leadership.”
The major banks reversed yesterday’s decline despite pressure on lending rates. The yield on ten-year Australian government bonds fell to a three-week low in the wake of a similar move in the US overnight.
A report this morning showed Australians are the most optimistic about the employment outlook in more than two decades. Westpac’s measure of unemployment expectations plunged 11 per cent last month to “the lowest level for the index since the mid-1990s”. The lower the reading, the less fear of unemployment.
“Confidence is at historic highs for both males and females although the confidence amongst females is particularly buoyant – near all-time record levels going back to 1975,” Westpac chief economist Bill Evans said.
“Employees in the following industries are the most confident about the job situation: real estate; accommodation and food; media and telecommunications; health care; and retail. This may be an indication of where labour shortages are likely to emerge in coming months.”
The bank’s consumer sentiment index remained at elevated levels, improving 0.6 per cent this month to 105.3.
Going up
Yesterday’s standout performer, Chalice Mining, led for a second day, rising 6.32 per cent to a record. The miner yesterday hailed its Gonneville maiden resource as Australia’s biggest nickel sulphide discovery in 20 years.
Seven West Media rose 4.87 per cent to a near three-year high in the wake of its acquisition of regional broadcaster Prime Media and a trading update yesterday.
NAB bounced 4.17 per cent, comfortably reversing yesterday’s post-earnings slide. Westpac put on 2.09 per cent, ANZ 0.43 per cent and CBA 0.5 per cent.
Among traditional defensives, United Malt Group gained 4.14 per cent, Amcor 2.07 per cent, APA Group 1.84 per cent and Atlas Arteria 1.76 per cent. Goodman Group gained 0.89 per cent, Wesfarmers 0.53 per cent and Telstra 0.38 per cent.
A positive trading update boosted metals recycler Sims 0.84 per cent. CEO Alistair Field told today’s AGM the company expects underlying earnings to increase sixfold this half from the prior corresponding period to $310 – $350 million.
Communications and metal detection specialist Codan added 0.58 per cent following the appointment of former Detmold Group CEO Alf Ianniello as Managing Director and CEO. Mr Ianniello replaces Donald McGurk, who will retire in January.
Going down
Gold miner Ramelius slipped 3.51 per cent after Gold Road Resources dropped out of the bidding for Apollo Consolidated. Gold Road declined to raise its 56-cents-per-share offer for Apollo, deciding instead to accept Ramelius’s off-market offer for its 19.9 per cent holding. Apollo shares dropped 3.08 per cent. Gold Road gained 0.68 per cent.
Vicinity Centres slid 1.55 per cent after reporting a 25.7 per cent decline in retail sales at its shopping centres in NSW and Victoria during a first quarter impacted by lockdowns. The decline was partly offset by a 7.1 per cent increase in unaffected States.
Monday’s surge in travel and tourism stocks continued to fade. Webjet sagged 3.21 per cent, Corporate Travel Management 2.5 per cent, Flight Centre 2.54 per cent and Qantas 2.23 per cent.
Iron ore miners fell after spot prices retreated towards 18-month lows. BHP shed 2.07 per cent, Fortescue Metals 1.68 per cent and Rio Tinto 1.22 per cent.
Other markets
US futures continued a recent run of fades during Asian trade. S&P 500 futures fell 11 points or 0.23 per cent.
A negative morning on Asian markets saw the Asia Dow retreat 0.1 per cent, China’s Shanghai Composite 0.56 per cent, Hong Kong’s Hang Seng 0.51 per cent and Japan’s Nikkei 0.05 per cent.
Oil extended last night’s two-week high. Brent crude firmed 36 US cents or 0.42 per cent to US$85.14 a barrel.
Gold was broadly steady following four straight gains, up 50 US cents or 0.02 per cent to US$1,831.30 an ounce.
The dollar eased 0.05 per cent to 73.72 US cents.
