By Jessica Yun
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket climbed on Monday following a slow start to the session, with tech and banking players lifting the bourse into the green. The positive start to the week came after a strong US jobs report over the weekend allayed fears the world’s biggest economy was headed for recession.
The S&P/ASX 200 finished up 55.4 points, or 0.7 per cent, to 8205.4 amid light trading as most of the country observed the Labour Day holiday.
The Australian dollar had dropped to a nearly three-week low of US68.04 ¢, from US68.42¢ at Friday’s ASX close.
The strength of the US economy reclaimed its spot as the top mover of markets.Credit: Dominic Lorrimer
The lifters
Arcadium Lithium remained at the top of the bourse all day, finishing 45.7 per cent higher to $6.09 per share after Rio Tinto confirmed it had approached the global lithium chemicals producer with a takeover proposal. If it goes ahead, it would transform Rio Tinto into the world’s third-largest lithium supplier. Rio investors don’t appear pleased, however, with its shares closing 2 per cent lower.
Many miners hovered at the top of the index, benefiting from the surge of oil prices last week on the threat of more conflict in the Middle East. Liontown Resources closed up 18.9 per cent, while Mineral Resources lifted 4.6 per cent.
Star Entertainment Group rose 7.6 per cent.
Tech wound up as the best-performing sector, closing 1.6 per cent higher, led by Xero (up 1.7 per cent). Financials was a close runner-up (up 1.5 per cent); all the big four banks were up by more than 1.2 per cent, with Westpac leading the pack with gains of 2.1 per cent. NAB rose 1.9 per cent.
The laggards
Gold miner West African Resources stayed at the bottom of the index all day, shedding 19.5 per cent. Fisher & Paykel Healthcare closed 4.3 per cent lower and National Storage REIT dipped 2.4 per cent.
Oil drifted lower after surging last week as traders weighed Israel’s potential retaliation against Iran for a missile attack last week, with President Joe Biden discouraging a strike on Tehran’s crude fields.
Brent slipped below $US78 a barrel after jumping the most since January 2023 last week, while West Texas Intermediate was near $US74. Biden said on Friday that he didn’t know when an Israeli response would come, but “I’d be thinking about other alternatives than striking oil fields.”
The lowdown
The market is “in a waiting game for now”, as traders wait for clarity over developments in the Middle East, said Yeap Jun Rong, a market strategist for IG Asia. Any hit to Iran’s energy infrastructure “may see Brent crude prices head above the $US80 level”.
Judo Bank economist Matthew De Pasquale said the spike in oil prices could drive up short-term inflation. “Still, the volatility of the series means the RBA [Reserve Bank of Australia] will focus on underlying inflation pressures, pushing the transitory impact of automotive prices to the side,” he wrote in a note.
The Reserve Bank’s minutes for its September meeting will be released tomorrow. Strong employment growth in the US means markets have reduced expectations for further rate cuts.
“The market is now only pricing in 9 basis points of rate cuts for December in Australia, reflecting the very small likelihood of a rate cut locally,” said De Pasquale.
Over the weekend the US Labor Department reported non-farm payrolls rose by far more than expected in September, suggesting some of July’s deterioration in the US labour market was little more than a blip.
“There was absolutely no ambiguity in the way the market traded the US jobs data – it was solid across all metrics, and remaining US recession calls have once again been pushed out,” Pepperstone head of research Chris Weston said.
The S&P 500 climbed 0.9 per cent and got close to its all-time high set last Monday. The Dow Jones Industrial Average rose 341 points, or 0.8 per cent, to set its own record, while the Nasdaq composite clambered 1.2 per cent higher.
In the meantime, the strength of the US economy reclaimed its spot as the top mover of markets.
Treasury yields soared in the bond market after the US government said employers added 254,000 more jobs to their payrolls last month than they cut. That was an acceleration from August’s hiring pace of 159,000 and blew past economists’ forecasts.
It was a “grand slam” of a report, according to Lindsay Rosner, head of multi-sector investing within Goldman Sachs Asset Management. She said policymakers at the Federal Reserve, who have been trying to pull off the difficult feat of keeping the economy humming while getting inflation under control, “must be smiling”.
At Bank of America, economist Aditya Bhave expects the Fed to stop cutting its target for the federal funds rate when it hits a range of 3 per cent to 3.25 per cent. That’s a quarter of a percentage point higher than the bottom that he was earlier forecasting. The federal funds rate is sitting in a range of 4.75 per cent to 5 per cent.
Tweet of the day
Quote of the day
“It is possible to switch off a unit … It seems to work, and our people are getting familiar with it.”
That’s AGL chief operating officer, Markus Brokhof, after an Australia-first trial of taking one of the units at its Bayswater generator in NSW offline for five hours and returning it to service in the afternoon.
Australia’s largest power station operator is trialling a shutdown of some units during the day while other companies are cutting back output to their lowest levels ever as they fight to dodge spiralling losses when solar panels swamp the grid.
You may have missed
A bidding war may break out for Platinum Asset Management, with prominent investor Geoff Wilson said to be among other parties interested in the funds management group co-founded by legendary investor Kerr Neilson.
Wilson Asset Management is one of the parties understood to be interested in Platinum, according to several sources, who spoke on the condition of confidentiality because the discussions are private.
With Bloomberg, AP
The Market Recap newsletter is a wrap of the day’s trading. Get it each weekday afternoon.