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Australian shares rose for a second day as takeover action and gains in banks and defensive sectors helped the market look past weak leads from Wall Street and commodity markets.

The S&P/ASX 200 climbed 22 points or 0.3 per cent by mid-session. The rally nudged the index into positive territory for the week.

Copper miner OZ Minerals jumped after the board backed an improved takeover offer from BHP. Gold miners and healthcare providers were among the morning’s drags.

What’s driving the market

A directionless week looked set to end with a modest gain as a two-day recovery cancelled out mild down-pressure through the first half. The ASX 200 hit a five-month high on Monday, then spent much of the week in a narrow trading band.

“The Aussie market has had a quiet run this week. Still, it has managed to preserve its 7,000-plus trajectory, perhaps the best that we can hope for amid uncertain global macroeconomic conditions and geopolitical tensions,” Kunal Sawhney, CEO of research group Kalkine, said.

“But at least we can say that the benchmark ASX 200, if it can hold its ground from here on, can end 2022 on a good note, somewhere very close to where it started the year. After all, we still have next month’s positive expectations, like a smaller or no rate hike by the RBA and the likely Santa Claus rally.”

This morning’s trade showed a mild defensive bent. Financials, utilities and consumer staples were among the pick of the sectors. Resource stocks were broadly flat. Small caps and gold miners declined.

An uninspiring session on Wall Street overnight saw stocks retreat after central bank officials warned interest rates may have to go significantly higher to bring down inflation. The S&P 500 finished 0.31 per cent in the red.  

An overwhelming  majority of economists polled by Reuters expect the Federal Reserve to raise benchmark rates by half a percentage point next month after four consecutive increases of three-quarters of a percentage point. However, most now expect the top in rates to be 25 basis points higher than they did when polled last month.

The odds on another 25 bp rate hike here next month firmed up after unemployment fell to a 48-year low and wages grew more than expected. Many economists also expect another hike early next year.

Going up

OZ Minerals rallied 4.11 per cent after the board backed a revised $9.6 billion takeover offer from BHP. The diversified miner has given BHP four weeks to carry out due diligence to firm up a conditional, non-binding indicative proposal to acquire OZ for $28.25 a share.

The revised offer represents a 49.3 per cent premium to OZ’s share price before BHP’s initial offer of $25 per share. The board intends to unanimously recommend the revised offer in the absence of a superior proposal. BHP shares gained 0.55 per cent.

Rio Tinto edged up 0.12 per cent after negotiations with minority shareholders of takeover target Turquoise Hill fell through. Rio said it would continue to pursue the acquisition.

Infection prevention specialist Nanosonics put on 2.32 per cent as improved market conditions fuelled a 42 per cent bump in revenues over the first four months. Capital revenue increased by 63 per cent compared with the prior corresponding period.

The Australian listing of Kiwi dairy giant Fonterra climbed 2.15 per cent after the firm announced the sale of its Chilean business for NZ$1.055 billion. CEO Miles Hurrell said the divestment would allow the firm to focus on New Zealand milk.

Traditional defensives outperformed. GrainCorp put on 1.92 per cent, health insurer NIB 3.41 per cent and healthcare firm Fisher & Paykel 2.77 per cent. Heavyweight gains included Westpac +1.72 per cent, Wesfarmers +0.79 per cent and Woolworths +0.96 per cent.

Going down

Online luxury retailer Cettire tumbled 12.2 per cent to $1.47 after founder and CEO Dean Mintz sold 41 million shares at $1.46 per share. The block trade represented 10.8 per cent of the firm’s issued capital. Mintz remains the online retailer’s largest shareholder with a holding of 45.9 per cent.

Lendlease faded 0.76 per cent after telling today’s AGM earnings would be affected by a deteriorating real estate market. This year’s result was expected to be towards the lower end of guidance. CEO Tony Lombardo said the business was on track to achieve development completions of $8 billion per annum from FY24.

Jeweller Lovisa fell 4.36 per cent from a record high after reporting a 16.1 per cent improvement in comparable store sales for the first 19 weeks. The firm’s rapid expansion continued with a net 47 new stores opened year to date.  

Gold miners fell as gains in the US dollar and US treasury yields dulled interest in precious metals. Ramelius dropped 4.82 per cent, St Barbara 2.87 per cent and Gold Road Resources 1.5 per cent.

Lithium miners also softened. Pilbara Minerals shed 4.29 per cent, Allkem 2.6 per cent and Mineral Resources 2.21 per cent.  

Other markets

Asian markets shrugged off declines in the US. The Asia Dow advanced 0.65 per cent, China’s Shanghai Composite 0.04 per cent, Hong Kong’s Hang Seng 1.5 per cent and Japan’s Nikkei 0.37 per cent.

US futures were little changed. S&P 500 futures lifted two points or less than 0.1 per cent.

Oil bounced off a two-week low. Brent crude rose 55 US cents or 0.6 per cent to US$90.33 a barrel.

Gold clawed back a portion of last night’s 0.7 per cent loss, rising US$2.20 or 0.1 per cent to US$1,765.20 an ounce.

The dollar bounced 0.15 per cent to 66.97 US cents.

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