Positive US leads and a retreat in bond yields helped the share market rise to its highest in a week and a half.
The S&P/ASX 200 climbed 44 points or 0.61 per cent to 7328. Today’s rise was the index’s third in a row.
Rate-sensitive growth sectors led the advance. Iron ore miners declined with the price of ore after China’s government set a lower growth target than analysts anticipated.
What’s driving the market
The market showed few concerns ahead of a near-certain interest rate rise tomorrow after Wall Street embraced a retreat in yields from closely-watched levels.
US stocks rose on Friday after the ten-year US treasury yield backed off the 4 per cent level. A 1.61 per cent rally in S&P 500 helped break a three-week losing streak. The Dow climbed 1.17 per cent on the day and 1.75 per cent during its first winning week in five.
“The US dollar and Treasury yields both fell back on Friday in what was a good day for equities everywhere – except Australia,” Ray Attrill, NAB’s head of FX strategy, said.
The ASX narrowed the performance gap this morning as Australian yields followed their US counterparts lower. The ten-year Australian yield dived 13 basis points to 3.78 per cent. Tech and real estate stocks led the rally. Both sectors are highly sensitive to fluctuations in the cost of borrowing.
Markets appear to have already priced in another rate hike when the Reserve Bank gathers tomorrow for the second policy meeting of the year. The central bank is expected to raise for a record tenth consecutive time since the current cycle began last May.
“All 27 economists surveyed by Bloomberg expect the RBA to lift rates by 25bp to 3.60%,” IG market analyst Tony Sycamore said. “The main interest, therefore, will be the forward guidance in the accompanying statement.”
Sycamore expects the bank’s guidance to retain the hawkish theme of last month. “Further increases in interest rates will be needed over the months ahead,” was the key phrase. With markets currently priced for three more hikes, any softening of that outlook would likely send the dollar lower and shares higher.
Going up
Rate-sensitive technology was the morning’s best-performing sector. Afterpay owner Block climbed 5.44 per cent, Megaport 5.64 per cent, Xero 5.04 per cent and Hub24 4 per cent.
BrainChip soared 15.2 per cent after launching the second generation of its platform for AI development. The firm said the new generation Akida platform would allow designers and developers to incorporate features that were previously not possible.
Core Lithium surged 6.25 per cent after more than doubling the estimated resource at its second proposed lithium mine in the Northern Territory. The miner hiked the mineral resource estimate at the BP33 deposit at its Finiss project from 4.37 Mt at 1.53 per cent lithium oxide to 10.1 Mt at 1.48 per cent following drilling results.
Fellow battery metal-focussed firms Lake Resources and Novonix gained 7.44 and 4.75 per cent, respectively.
The big banks continued to recover from last week’s multi-month lows. NAB put on 2.3 per cent, rising for a second day. ANZ added 1.97 per cent, Westpac 1.54 per cent and CBA 1.14 per cent.
Other heavyweight gains included James Hardie +3.38 per cent, Macquarie Group +3.13 per cent and Wesfarmers 2.68 per cent.
Industrial landlord Goodman Group firmed 2.58 per cent. Mirvac added 2.98 per cent, Centuria Capital 2.35 per cent and Stockland 2.28 per cent.
Fund manager Magellan climbed 2.53 per cent despite further outflows. Total funds under management shrank to $45.4 billion last month from $46.2 billion in January.
GQG Partners gained 2.08 per cent after reporting net inflows of $3 billion for the first two months of the year.
Going down
Bulk metal miners declined for the first time in five sessions as iron ore eased from Friday’s eight-month high. Ore futures on China’s Dalian Commodity Exchange retreated 3 per cent this morning after China set an economic growth target below consensus expectations.
Premier Li Keqiang yesterday announced a GDP target of “around 5 per cent”. The average forecast among economists polled by CNBC was 5.24 per cent.
Fortescue Metals reversed 3.47 per cent. Rio Tinto lost 2.11 per cent. BHP shed 0.96 per cent.
AMP eased 1.18 per cent after the exchange operator queried its continuous disclosure practices. The ASX sent the firm a ‘Please explain’ letter in regards to an interim earnings result last month that sent the share price down 13.36 per cent. The investment manager said the market reaction was partly due to some analysts failing to update their earnings estimates to reflect an earlier AMP announcement about impairments within the result.
“Had all sell-side analysts updated their models, AMP’s reported statutory NPAT would have been approximately 5% lower than the consensus estimate,” the company said.
Nitro Software eased 0.23 per cent after a takeover offer lapsed, leaving one suitor still in the race. Alludo’s offer of $2.15 per share lapsed, leaving Potentia’s $2.17 per proposal offer the only offer on the table. The Nitro board recommended shareholders accept Potentia’s offer.
Cash Converters was unchanged after buying the UK’s largest unlisted pawnbroker. The Australian firm will pay $24.7 million to acquire Capital Cash, which operates 42 franchise stores in the UK.
Other markets
Asian markets were mixed. The Asia Dow tacked on 1.02 per cent. Japan’s Nikkei added 1.23 per cent. Hong Kong’s Hang Seng per cent dipped 0.02 per cent. China’s Shanghai Composite gave up 0.17 per cent.
US futures overcame early weakness to trade little changed. S&P 500 futures were recently down one point or 0.02 per cent.
Oil gave back more than half of Friday’s rally. Brent crude declined 57 US cents or 0.66 per cent to US$85.26 a barrel.
Gold added to last week’s 2.1 per cent rebound. The yellow metal firmed US$3.40 or 0.18 per cent to US$1,1858 an ounce.
The dollar eased 0.07 per cent to 67.5 US cents.