The Australian sharemarket rose for a fourth straight session while the local currency fell after Westpac lifted its variable home loan rates.
The S&P/ASX 200 index closed 47.5 points, or 0.8 per cent, higher at 6352.2, advancing to a fresh 10-year high. The Australian dollar dropped to about US72.99¢ from US73.44¢ before Westpac’s announcement.
It was a good session for the major banks, which rallied during the afternoon after Westpac became the first of the big four banks to hike home loan rates.
In a statement on Wednesday, the bank said it would increase its variable home loan rates by 14 basis points, effective from September 19. Westpac was the best performing of the big four, advancing 2.7 per cent to $28.88.
Boral shares gained after the company reported a strong lift in underlying profits, driven by good results from the company’s North American division and its Australia division, which it is benefiting from the east-coast infrastructure boom. Boral’s underlying profit advanced 38 per cent to $473 million. Its shares rose 10.1 per cent to $7.07.
Bellamy’s Australia’s earnings climbed 65 per cent, lifting the organic baby formula company back to a $43.2 million profit following an $809,000 loss in the previous year.
The company beat previous revenue growth guidance, despite lifting its full-year guidance twice during the financial year. It shares closed 7.5 per cent higher at $11.96. A2 Milk shares were also up on Wednesday, closing 3.9 per cent higher at $11.89.
Telstra shares fell 1.3 per cent to $3.14 as it traded ex-dividend. The telco will pay a dividend of 11¢ per share on September 27.
Speedcast International continued to fall after posting a 37 per cent loss on the back of its financial results on Tuesday.
The company’s performance during the 2018 financial year was below investor expectations and it issued disappointing full year guidance. It shares closed 5.5 per cent lower on Wednesday at $3.97.
Afterpay Touch shares fell 5 per cent to $18.95, softening for the second day in a row from its all-time high on Monday. Despite the recent softening, the company’s shares are still up more than 200 per cent year-to-date.
Citi retained its ‘buy’ call on Appen, lifting its price target by more than 40 per cent as it forecast strong medium-term growth for the machine learning company. The broker lifted its previous price target of $12.19 to $17.13, a 14 per cent premium to its $15.01 closing price on Tuesday. Citi said that Appen had proved its high quality data sets and large scale analytical capabilities to be in high demand. “The winner in Content Relevance will likely be the one who can analyse the ‘most amount of data’, with the ‘highest quality of analytics’, in the ‘shortest amount of time’ at a ‘competitive price’. Appen is well very placed to be that winner over the near term,” the broker’s analyst said in a note on Wednesday. It said that the company’s updated guidance may prove to be conservative given the strong growth prospects for the company over the next 12 months.
What moved the market
US bond yield curve
The latest US consumer confidence data has hinted at continued economic strength in the United States, lifting US Treasury yields and further flattening the yield curve. Consumer confidence for August hit its highest level since October 2000, improving on an already solid July result. On Wednesday, the 2-year Treasury yield was sitting at 2.65 per cent while the 10-year Treasury yield was at 2.87 per cent, a gap of just 22 basis points. On Tuesday, US Treasury Secretary Steve Mnuchin said the wasn’t concerned about the flattening curve, a day after the gap between the yields shrank to just 18.3 basis points.
Supply constraints in Australia are putting pressure on Chinese alumina prices which are in turn, pressuring the price of aluminium. Chinese alumina prices hit their highest level since December on Tuesday, as strikes at an Alcoa plant and maintenance at South32’s Worsley refinery cut supplies. Australia’s supply troubles are only adding to global supply concerns, with US sanctions against RUSAL set to impact on 7 per cent of global alumina supply when they come into affect on October 23. The price of aluminium on the London Metal Exchange climbed 1.8 per cent on Tuesday to $US2,110 a tonne with the market expected to remain tight for the forseeable future.
Investors are betting that a trilateral trade deal between the United States, Canada and Mexico will be reached, lifting the Canadian dollar to a two-month high against the US dollar. A new agreement between the three countries, who are set to host the FIFA World Cup in 2026, would overhaul the more-than 24-year-old North American Free Trade Agreement pact. Canada sends 75 per cent of its exports to the United States so there is added pressure for a deal to be reached. The Canadian dollar, known as the loonie, has risen 1.7 per cent in the past two weeks against the greenback to be trading above US77.30¢.
Iron ore imports
China’s iron ore import demand has peaked and have underperformed China’s crude steel production this year according to Macquarie Wealth Management. Official custom statistics and shipments from partner countries have both shown that imports have been essentially flat year-on-year to July, despite China’s production of crude steel rising 6.5 per cent for the year-to-date. Major iron ore miners are already beginning to look for new markets outside of China with Vietnam beginning to import iron ore for the first time only last year. The price of iron ore was flat on Tuesday at $US65.85 a tonne.