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Market wrap: bulls return to the market driver’s seat

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By John Beveridge - 



The bulls grabbed back the steering wheel of the Australian share market on Friday, pushing through a 1% rise on the back of a four-day losing streak.

Some strong US labour figures boosted optimism about the state of the world’s largest economy which boosted Wall Street, with the Australian market dutifully falling into line.

The 74.7 point rise on the ASX 200 took the index to 7421.2 points, well up on Thursday’s one month low but not quite erasing all of the falls, with the market still down 1% for the week.

One day’s trading is far from a trend but at least the shock of cold water that has been hosed on the market by central bankers warning that official interest rate cuts would be slower and smaller than expected has not entirely extinguished the animal spirits of investors.

Defensive utilities the only weakness

Only one of the Australian market’s 11 sectors was down – the defensive utility sector – but the others were all racing upwards, led by a 3% rise in information technology.

Just a few examples within that sector showed what was going on with shares in Zip (ASX: ZIP) up 11.4% to 63.5c, Xero (ASX: XRO) shares added an impressive 4.8% $114.73 while shares in EML Payments (ASX: EML) leapt an impressive 9.9%.

Rebounding commodity prices buoyed shares in the big miners as hopes grew that China is preparing to boost its ailing economy with more stimulus measures.

China pushes up commodity prices

Fortescue (ASX: FMG) shares were up 2% to $27.58, while Rio Tinto (ASX: RIO) shares gained 0.9% to $128, with shares in BHP (ASX: BHP) steady at $45.73.

It was a good day for the coal miners, with shares in Whitehaven Coal (ASX: WHC) jumping an impressive 3.8% to $8.11 after the company stuck with its full-year coal production guidance, despite headwinds in the form of some mining issues and a December train derailment at its Narrabri mine.

Yancoal (ASX: YAL) shares were also up 5% to $5.52 while shares in New Hope (ASX: NHC) added 2.9% to $5.32.

Banks join in the party

Even the big banks managed to join the party with shares in Westpac (ASX: WBC) performing the best, up 1.5% to $23.20, while ANZ (ASX: ANZ) shares were up 1.3% to $26.13, NAB (ASX: NAB) shares were up by the same percentage to $31.28 and the big daddy of the sector, Commonwealth Bank (ASX: CBA) pushed 0.7% higher to $113.28 after hitting a record high earlier in the week.

One of the big counter-cyclical rallies of the week in the price of uranium miners finally took a breather on an otherwise bullish day with shares in Boss Energy (ASX: BOE) down 3.2% while Paladin Energy (ASX: PDN) shares fell 2%.

In corporate news, shares in regenerative medicine company Mesoblast (ASX: MSB) leapt 13.2% to 30c after the US Food and Drug Administration approved a designated treatment for a rare paediatric disease.

Small cap stock action

The Small Ords index fell 0.94% for the week to close at 2863.8 points.

ASX 200 vs Small Ords

The week ahead

Once again action in the United States will be pivotal in driving the Australian share market with the big two announcements around economic growth and a key measure of inflation.

In the US, the big announcements will be the economic growth numbers on Thursday and the personal income & spending data on Friday, with the latter a key inflation measure.

Locally the monthly business indicator which is released on Tuesday is seen as an accurate guide to economic growth and it will also be worth keeping an eye out on the NAB business survey and the Judo Bank ‘flash’ purchasing managers’ index.

Interest rates will also be in the news with the People’s Bank of China expected to cut loan prime rates on Monday and official rate decisions to be handed down by the European Central Bank (ECB), the Bank of Canada and the Bank of Japan.

The other big thing to watch will be the continuation of the US company reporting season with some of the highlights in the coming week being results United Airlines, 3M, General Electric, Haliburton, Procter & Gamble, Verizon, Netflix AT&T, IBM, ResMed, Tesla, Alaska Airlines, American Airlines, Comcast, Dow, Intel, T-Mobile, Visa, American Express and Colgate Palmolive.

Locally, quarterly sales and revenue reports are expected from a range of miners including South32, Lynas Rare Earths, Northern Star Resources, St Barbara, Pilbara Minerals, Woodside Energy, Santos, Regis Resources and Fortescue Metals Group.