Market wrap: five straight rising sessions a bullish sign
WEEKLY MARKET REPORT
An amazing run of five straight higher sessions for the Australian share market was the perfect bullish run into the public holiday on Friday.
With the US market also setting five consecutive record highs despite a crunch in the value of Tesla shares, there is an unmistakably bullish tone in markets despite several headwinds.
Here in Australia the ASX 200 closed up 0.5% or 36.2 points on Thursday to hit 7549.4 points.
That is a rise of 1.8% since last Friday with all sectors bar technology showing good gains, suggesting a fairly broad rise rather than a rotation out of defensive stocks and into growth.
It also leaves the Australian market withing striking distance of the local market record of 7,6328.9 points set back on 13 August 2021.
Chinese stimulus boosting big miners
While technology stocks have been one of the main engines for world market growth, it was the decidedly old-fashioned and familiar prospect of China stimulating its economy that helped the Australian stocks higher on Thursday.
Iron ore futures in Singapore pushed prices for iron ore above $US136 a tonne for the March contract as investors reacted to news that the governor of China’s central bank was looking to reduce the reserve requirement ratio for banks within two weeks.
Naturally that lifted the share prices of the big iron ore miners with BHP (ASX: BHP), Rio Tinto (ASX: RIO) and Fortescue (ASX: FMG) all up at least 1.5%.
Traders now are sure that the Chinese authorities are working hard to breathe some life into their suffering share market and feeble economic outlook and that is overcoming the resistance to stimulate the economy.
That should mean more iron ore exports at higher prices, which is great news for shareholders in the big miners and for the Australian tax base as well.
Helping the bullish case for iron ore was news from Fortescue that it expected to meet its production guidance for the current financial year, with iron ore shipments close to record levels in the first half.
The weakness in technology stocks is an understandable reaction to a sharp slowdown in Tesla sales, which led to a chunky 5% fall in shares of the US automaker.
That fed into a 0.7% fall in the local Australian technology index.
Domino’s fails to deliver
There was some local stock specific action on Thursday with shares in Domino’s Pizza (ASX: DMP) being crunched by 31.1% to $39.51 after the company withdrew its guidance amid slumping sales at its Asian stores.
Historically a growth stock, investors are now not even sure Domino’s can hold its profitability and sales steady, causing a savage re-rating.
Lithium woes continue
There was a slight ray of hope for the beleaguered lithium mining sector with shares in Mineral Resources (ASX: MIN) rising 7.1% to $59.39 after the miner held firm on its current volume and cost guidance, claiming that its mines at Wodgina, Mt Marion and Bald Hill were all still profitable at current spodumene prices.
Not so happy were shareholders in Sayona Mining (ASX: SYA) with its shares down 9.1% after the company shed 14 staff from its North American operations as the company tightens its belt to ride out the slashed lithium price.
As usual shareholders are always happy to hear some cash is heading their way and Incitec Pivot (ASX: IPL) shares rose 4.7% to $2.90 after the fertiliser group announced it will return $500 million to shareholders.
Resmed (ASX: RMD) shareholders also had a pleasant day with shares rising 6.4% after a quarterly report that maintained its quarterly dividend at US48¢ and revealed its revenue for the three months to December came in higher than analyst expectations at $US1.2 billion ($1.8 billion).
Small cap stock action
The Small Ords index climbed 1.29% this week to close at 2900.7 points.
ASX 200 vs Small Ords
The week ahead
It could be an eventful week both here and overseas with no shortage of new data to keep an eye on.
The big one to watch locally will be the inflation figures which are out on Wednesday with expectations of a 0.8% rise for the quarter and 4.2% for the year.
Other releases to keep an eye on include CommSec’s State of the States economic scorecard, retail sales, home prices, producer prices and home lending.
Looking overseas, only the most optimistic would be expecting the US Federal Reserve meeting on Tuesday and Wednesday to produce a cut to official interest rates as the tug of war between markets and the Fed over the pace and number of cuts continues.
There may, however, be some clues given after the meeting but if current form is a guide, it will be to continue hosing down the fairly optimistic hopes of market observers.
Other releases to watch for include January US nonfarm payrolls, with jobs predicted to lift by 155,000 with the jobless rate steady at 3.7%.
Also having a big market impact will be the continuing US profit reports which this week cover a wide range of large companies including General Motors, Pfizer, Alphabet, Microsoft, Starbucks, UPS, Boeing, MasterCard, Novartis, Merck, Amazon, Apple, Meta Platforms, Chevron and Exxon Mobil.