ASX ends 1.1% higher; here’s why stock market defied COVID-19 concerns

Summary 

  • The S&P/ASX200 ended 1.06% higher at 7,386.40, setting a new 20-day high.
  • Australia’s trade surplus hit AU$13.3 billion in June on a strong demand for iron ore.
  • Mineral explorer Orocobre emerged as the top gainer, while BNPL major Zip Co remained the top loser.
  • All sectors, barring health care, ended in green, while energy gained the most.

Australian shares closed higher for the second straight session on Thursday, led by a strong rally in blue-chip mining, energy, and banking stocks. The equity market witnessed a surge in buying despite a rise in COVID-19 cases as investors seemed to set aside virus jitters for now and shifted focus to corporate earnings.   

The S&P/ASX200 ended 77.70 points or 1.06% higher at 7,386.40, setting a new 20-day high. The benchmark index opened higher earlier today, following a strong finish at Wall Street in the overnight trade, and rallied nearly 1.1%. Over the last five sessions, the index has gained 0.7% and is currently 0.27% below its record high. 

                     

The Last Trade || ASX Ends 1.1% Higher; Here’s Why Stock Market Defied COVID-19 Concerns

 

Stronger-than-expected trade data also lifted the market sentiment. As per the data released by the Australian Bureau of Statistics, the merchandise trade surplus hit AU$13.3 billion in June, driven by a strong demand for iron ore. The exports rose by 8% to AU$41.3 billion and the imports stood at AU$28 billion.   

Among the individual stocks, mineral exploration firm Orocobre Ltd (ASX:ORE) was the top percentage gainer on the ASX, rising 9.8%. Some of the other notable gainers were miner Pilbara Minerals (ASX: PLS), resource company Lynas Rare Earths (ASX: LYC) and multinational contractor CIMIC Group (ASX: CIM).

On the flip side, fintech firm Zip Co Limited (ASX:Z1P) was the top loser on the ASX, falling over 7.8%. Some of the other worst performers include e-retailer Kogan.com Ltd. (ASX:KGN), dairy and cheese company Bega Cheese Limited (ASX:BGA) and Australian conglomerate company Metcash Limited (ASX: MTS).

Here’s how sectoral indices performed today

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The market breadth, indicating the market's overall strength, was strong with 10 of the 11 sectoral indices ending in green. The energy and materials sectors were the best performers with over 2% gain. Among others, financial, industrial, utilities, and telecom added over 1% gain.  

Meanwhile, the health care sector emerged as the worst performer with a 0.3% loss. 

In the banking sector, all the Australia’s big four lenders - Commonwealth Bank of Australia, Australia and New Zealand Banking Group, Westpac Banking Corporation and National Australia Bank – ended in the green zone. 

Moving on to the energy space, index heavyweights Woodside Petroleum (ASX: WPL), Beach Energy Limited (ASX:BPT), Santos (ASX:STO), Oil Search (ASX:OSH), Origin Energy Ltd (ASX:ORG) and Ampol Limited (ASX:ALD) were among notable gainers. The rally in energy stocks was driven by a spurt in crude oil prices. Crude oil prices jumped nearly 4% on Wednesday despite an unexpected rise in the US crude oil inventories.

In the mining sector, index heavyweights BHP Group (ASX:BHP), Rio Tinto (ASX:RIO) ended higher for the second straight session. BHP shares rose over 3% on a deal with Elon Musk’s Tesla. The company has reportedly signed an agreement to supply nickel to electric vehicle maker Tesla from its Nickel West mines in Western Australia. However, BHP is yet to issue an official statement on this development.

Shares in news

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Shares of MoneyMe Limited (ASX:MME) jumped as much as 9% to AU$2.07 on strong trading update. Digital customer credit company has reported originations of AU$161 million for the June quarter of this fiscal, up nearly five-fold from a year earlier. Revenue rose 73% from a year ago to AU$19 million.

Shares of Santos Limited (ASX:STO) gained as much as 3.2% to AU$6.78 on upgrading production and sales outlook for FY21.

Australian oil and gas producer Oil Search Limited (ASX:OSH) extended gains into third session, rising 3.2% to AU$4.170. The energy firm had rejected AU$8.80 billion takeover bid from Santos Limited (ASX:STO) on Tuesday. Both the companies said they were open to further talks.

Shares of Carbine Resources Limited (ASX:CRB) dropped 6% after the gold and copper-focused miner completed the acquisition of the Muchea West Silica Sand Project in Perth. The 100% acquisition of the Muchea West follows CRB’s transaction to acquire Australian United Silica Corporation in April 2021.

Shares of buy-now-pay-later (BNPL) firm Zip Co Limited (ASX:Z1P) tumbled nearly 8% after the company released its June quarter earnings result.

Australian gold mining company Evolution Mining (ASX: EVN) has entered into an agreement with ASX-listed peer Northern Star Resources to acquire its assets for AU$400 million. Following the announcement, shares of Northern Star Resources (ASX: NST) rose 3.7% to AU$10.59.

Shares of Lynas Rare Earths (ASX: LYC) rallied as much as 9% to AU$6.41 after the miner secured a AU$14.8 million grant from the Australian government.

Shares of mineral exploration firm Orocobre Ltd (ASX:ORE) zoomed 12.12% to hit an intraday high of AU$7.81 after the company released its quarterly report for the June quarter. The stock was the top percentage gainer on the ASX. The miner has reported a rise in production and sales revenue during the quarter ended 30 June 2021.

Gold miner Newcrest Mining’s (ASX: NCM) released its quarterly business update. The company has reported gold production of 542,000 ounces and copper production of 38,000 tonnes in the June quarter of 2021. It has also set a goal of net-zero carbon emissions by 2050.

Asian markets trade higher

Asian markets extended rally for the second session on Thursday, tracking overnight gains in Wall Street. Investors seemed to have shrugged off virus concerns for now and shifted focus to the European Central Bank (ECB) meeting. Markets in Japan remained closed until Monday.

Hong Kong’s Hang Seng was the best performer in the region, rising nearly 1.6%. China’s Shanghai Composite was up 0.3%. The Straits Times in Singapore gained 1.3%.

In a similar trend, Taiwan’s Weighted Stock Index surged 0.3%, while Seoul’s Kospi was up 1%. India’s BSE Sensex also gained over 1% in opening deals.

In the overnight trade on Wednesday, US stocks ended higher as upbeat earnings reports by companies boosted investors’ confidence. The Dow Jones rose 0.83% and the S&P 500 added 0.82%. The NASDAQ Composite climbed higher by 0.92%.

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