Banks push ASX to record high after earnings optimism buoys Wall Street
By Jessica Yun
Welcome to your five-minute recap of the trading day.
The numbers
The Australian sharemarket hit a fresh record high on Tuesday following a solid lead from the US, which had a strong session amid optimism about upcoming company earnings.
Wall Street is bullish on the outlook for company earnings.Credit: Bloomberg
The S&P/ASX 200 closed 65.6 points or 0.8 per cent higher, at 8318.4 points, boosted by banks, industrial stocks and tech players, with nine of the 11 industry sectors advancing. Defensive sectors such as utilities and consumer staples declined, while the energy sector saw the biggest losses (1.3 per cent) as the oil price also fell.
The lifters
The strongest performer on the bourse was Healius (up 7.3 per cent), followed by Johns Lyng Group (up 5.2 per cent) and Regis Resources (up 4.8 per cent).
The financial sector drove the market higher with gains of 1.3 per cent, led by Commonwealth Bank – the local bourse’s biggest stock – which rose 1.8 per cent, and Westpac (up 1.6 per cent). NAB lifted 1.5 per cent and ANZ rose 0.9 per cent after announcing Oliver Wyman would lead a review into the culture and risk governance of ANZ’s markets division.
The bank said the prudential regulator had welcomed the appointment of the consulting giant, as it faces an investigation by the Australian Securities and Investments Commission over alleged market manipulation and workplace misconduct.
“This work will support our ongoing efforts to ensure conduct meets the standards we expect of our staff, and will help us to continue to strengthen our risk governance practices,” an ANZ spokesman said. “We are encouraging staff to provide their open and honest feedback and ideas throughout the process.”
Australian mining stocks also advanced, led by the world’s biggest miner BHP, which rose 0.5 per cent. Rio Tinto’s shares gained 0.9 per cent, and Fortescue Metals Group jumped 2.3 per cent. Building materials company James Hardie, which has the US as its biggest market, climbed 0.7 per cent, while packaging giant Amcor gained 1.4 per cent.
The laggards
Meanwhile, IDP Education was on the other side of the index with losses of 7.4 per cent, kept company by Treasury Wine (down 3.3 per cent) as investors digested Monday’s news that it was settling a shareholder class action for $65 million. Pilbara Minerals dipped 2.8 per cent.
Energy companies also declined 1.3 per cent, following oil prices lower after China’s highly anticipated Finance Ministry briefing on Saturday lacked specific new incentives to boost consumption in the world’s biggest crude importer. West Texas Intermediate fell more than 2 per cent to just below $US74 a barrel while Brent also slumped.
Oil and gas producer Santos fell 1 per cent and its rival Woodside dropped 2.2 per cent.
The lowdown
The ASX hit an intraday high of 8331.7 points and is up 9.1 per cent for the year. The last record high was set on September 30 at 8269.8 points, during which it set an intraday high of 8285.7, which Tuesday’s session exceeded. Tuesday’s gains come after the local bourse closed at a two-week high on Monday.
AMP chief economist Shane Oliver said markets were celebrating ongoing signs of ‘Goldilocks’.
“It’s pretty much a global phenomenon – it varies country to country, but particularly in the US it seems to be the main theme; economic growth has been OK and at the same time inflation has been coming down and there’s a prospect of lower interest rates ahead. That’s why it’s been buoying markets,” he told this masthead.
“There are a bunch of worries – the Middle East, threat to oil supplies, the US election coming up, a risk economies slow too much and we end up in recession. But for now, those risks which have been around for a while just keep getting put off and not materialising.”
IG market analyst Tony Sycamore said the rally has been fuelled by Wall Street as well as promises of stimulus from China. “There is also a sense of optimism about the Chinese economy following the dovish pivot from Chinese authorities in late September,” he said.
Looking at the economic outlook for investors, NAB economists have now brought forward their expectations of a rate cut by three months to February 2025.
“With the inflation backdrop cooling further over recent months, the risks of our overall profile are more balanced around February,” NAB head of Australian economics Gareth Spence and senior economist Brody Viney wrote in a note to clients.
“That said, we do not see the RBA as being ready to move this year, with underlying inflation well above target and an unclear read on volatile inflation and GDP data. In addition, there is ongoing uncertainty over the consumer response to easing real income pressures.”
The local gains come after the S&P 500 rose 0.8 per cent to top 5850, notching its 46th record this year. The Nasdaq 100 added 0.9 per cent and the Dow Jones Industrial Average climbed 0.5 per cent as investors looked to company earnings for further evidence of a soft landing for the US economy.
Meanwhile in the bond market, US Treasury futures were marginally lower while cash trading was closed for a US holiday. The US dollar edged up against currencies such as the Australian dollar. Bitcoin jumped 5 per cent.
America’s earnings season unofficially kicked off on Friday, led by financial bellwethers JPMorgan and Wells Fargo. Besides the other big banks reporting this week, traders will be paying close attention to results from streaming giant Netflix.
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