The S&P/ASX 200 surged to within 30 points of the 7000 level before paring its rise to 63 points or 0.92 per cent at 6953.
All 11 sectors rose. Real estate investment trusts and utilities led as bond yields retreated. Gains in key exports kept resource stocks on the upswing. A wild rally in buy now, pay later companies showed the first signs of stress after a week of triple-digit returns.
What’s driving the market
The market kept on track for its first positive monthly return since March, supported by a second night of strong gains in the US. The S&P 500 climbed 1.21 per cent as investors welcomed soft GDP data as a reason for the Federal Reserve to slow the pace of rate hikes this year.
“Any bad news on the economic front is now good news for the markets. The latest GDP data, along with other recent weak economic data, raises the likelihood of a dovish pivot by the US Fed.,” Kunal Sawhney, chief executive of research group Kalkine, said.
This morning’s rise had the ASX 200 on course for a monthly tally of around 380 points or 5.8 per cent. This month’s positive return breaks a three-month losing run that pushed the ASX 200 into a technical correction in June.
While debate continues over whether the current advance is a genuine reversal or another bear market rally, much technical damage has already been repaired.
“The ASX200 has rallied 8.5% from its June 6409 low, to be testing a band of resistance at 6950/60. A sustained break above 6950/60 would negate the technical damage caused by the sell-off in June and paint a more positive picture, with scope towards the 200-day moving average at 7200,” Tony Sycamore, market analyst at City Index, said.
A revival in risk appetite was underlined by extreme gains in buy now, pay later companies this week. While the rally stuttered this morning, value hunters who picked this month’s lows were sitting on huge profits.
“BNPL shares have the real star this week, with massive gains in most counters. Following the selloff in the first half of 2022, most BNPL stocks were oversold,” Kalkine’s Sawhney said.
“With the Australian government bringing in new regulations for the sector, investors are looking for sustainable growth in the industry going forward. Hence some amount of value buying was visible. Some company-specific development also led to the rally in BNPL stocks.”
Going up
A retreat in the yields offered by government bonds encouraged traders to buy equities offering similar safe, reliable returns. The yield on ten-year Australian bonds fell this morning to its lowest since late April.
Property stocks were the most obvious beneficiaries. Charter Hall Group climbed 4.5 per cent. Industrial heavyweight Goodman Group put on 3.74 per cent, Charter Hall Long WALE 2.82 per cent and Growthpoint Property 2.45 per cent.
Utilities also drew a bid. Origin Energy firmed 3.42 per cent after reporting a 4 per cent increase in domestic gas sales volumes last quarter. Full-year electricity sales volumes increased 6 per cent.
Gold‘s best session since March boosted local miners. St Barbara gained 4.63 per cent, Sandfire 3.31 per cent and Evolution 3.17 per cent.
News of a recovery in revenues helped lift Star Entertainment 0.98 per cent. The casino group expects to report normalised revenue of $1.53 billion for FY22 after domestic revenues improved 11 per cent last quarter.
Lake Resources edged up 1.61 per cent after reporting an operating cash loss of $2.8 million for last quarter and $7.2 million for FY22. The company aims to start producing lithium carbonate in 2024 using an experimental, disruptive technology.
Sezzle resisted a sharp reversal in BNPL firms after reporting a modest 1.9 per cent increase in merchant sales last quarter year-on-year. The share price hit a near four-month high before trimming its rise to 10.29 per cent.
Going down
This week’s spectacular recovery in buy now, pay later companies and other fintechs began to unravel. Zip Co reversed 15.46 per cent. Laybuy Group dropped 20 per cent, Openpay 19 per cent and Beforepay 14.39 per cent.
Wagering group PointsBet slumped 9.1 per cent after reporting a cash loss of $60.8 million for last quarter. The company made progress on key metrics, increasing its turnover by 32 per cent on the prior corresponding period and total net wins by 41 per cent.
Other markets
A mixed morning on Asian markets saw the Asia Dow unchanged as China’s Shanghai Composite dropped 0.37 per cent and Hong Kong’s Hang Seng lost 1.38 per cent. Japan’s Nikkei firmed 0.47 per cent.
Strong earnings released after the close of regular US trade boosted US futures. S&P 500 futures jumped 28 points or 0.7 per cent.
Oil added to last night’s gains. Brent crude for October delivery rallied 30 US cents or 0.3 per cent to US$102.13 a barrel.
Gold edged up another US$2 or 0.1 per cent to US$1,752.30 an ounce.
The dollar eased 0.05 per cent to 69.94 US cents.
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