ASX rallies as US stimulus tapering looms: Wednesday 3 November

Steven Deare
(Australian Associated Press)

 

Australian share market investors had their biggest day of buying in more than four weeks before the US Federal Reserve prepares to wind back economic stimulus.

Heavyweight materials and financial stocks were the biggest beneficiaries of a broad-based rally on Wednesday.

Deep Data Analytics chief executive Mathan Somasundaram said it appeared fund managers may have returned to the market after withdrawing prior to the Reserve Bank meeting on Tuesday.

The central bank scrapped its three-year bond yield target and brought its rate hike forecast forward to late 2023.

“So the market got more comfortable,” Mr Somasundaram said of Wednesday’s rally.

“The Reserve Bank is not going to take the asset bubble down soon, and money went back in to the market.”

In the US, the Federal Reserve board will meet in the next 24 hours and is tipped to scale back its $US120 billion ($A161 billion) monthly bond-buying program.

The program started last year to help the economy during the coronavirus pandemic.

Mr Somasundaram tipped a weak tapering of the program.

If this program stretched into next year, US rate hikes could be likely in 2023, he said.

“The US economy is slowing because of the inflation problem, so it’s hard to raise rates soon.”

Investors on Wall Street were not worried. They were pleased by company earnings overnight and pushed the S&P 500 and Nasdaq to record levels.

US jobs data due at the end of the week will further inform economic thinking.

On Thursday, the Australian Bureau of Statistics will publish retail trade figures for September.

People in NSW and Victoria were under coronavirus lockdowns and a fall in the figures is likely.

In the latest trading day, the benchmark S&P/ASX200 index closed higher by 68.4 points, or 0.93 per cent, to 7392.7.

The index is a little more than 200 points from its record level.

The All Ordinaries closed up 66.4 points, or 0.87 per cent, to 7713.

AMP shares gained more than nine per cent after the company sold its stake in life insurer Resolution Life for $524 million.

AMP last year sold its own life business to Resolution for $3 billion.

Telstra sealed a Department of Defence deal worth more than $1 billion which includes providing 5G mobile services.

The carrier confirmed it will continue providing network and telecommunications service to Defence staff through a five-year contract.

Shares closed even at $3.90.

Financial software vendor Praemium had a second consecutive day of big gains.

The company on Monday spurned a $785 million takeover offer from Netwealth.

The Praemium board is open to better offers.

Shares were up 8.77 per cent to $1.55.

In mining, Fortescue jumped more than three per cent. BHP and Rio Tinto improved by more than one per cent.

In banking, ANZ was best and gained more than two per cent. The Commonwealth and NAB improved by more than one per cent. Westpac was little changed.

A court has approved Brazilian meat processing firm JBS’ plan to buy salmon farmer Huon Aquaculture.

JBS will pay $3.725 each for most shares, and separately buy those held by Surveyors International.

Huon shares were down 0.27 per cent to $3.71.

Packaging group Amcor pleased investors with its first quarter update.

The company improved sales and earnings despite customers around the world having supply chain problems.

Earnings were up six per cent on a constant currency basis.

Shares improved by 0.75 per cent to $16.11.

The Australian dollar was buying 74.44 US cents at 1724 AEDT, lower from 74.90 cents at Tuesday’s close.

 

ON THE ASX

* The benchmark S&P/ASX200 index closed higher by 68.4 points, or 0.93 per cent, to 7392.7 on Wednesday.

* The All Ordinaries closed up 66.4 points, or 0.87 per cent, to 7713.

* At 1724 AEDT, the SPI200 futures index was up three points, or 0.04 per cent, at 7366 points.

 

CURRENCY SNAPSHOT

One Australian dollar buys:

* 74.44 US cents, from 74.90 cents on Tuesday

* 84.75 Japanese yen, from 85.95 yen

* 64.26 Euro cents, from 64.41 cents

* 54.61 British pence, from 54.76 pence

* 104.43 NZ cents, from 104.34 cents.

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