The Australian sharemarket climbed to new heights thanks to a positive lead from Wall Street, with resources stocks leading the gains amid plenty of reasons to feel bullish about the sector.
The benchmark S&P/ASX200 index surged 1.06 per cent to 7386.4 – a closing record high and just 20 points off its all-time intraday peak of 7406 reached on June 16 – while the All Ordinaries Index jumped 1.03 per cent to 7658.9.
“The Aussie market continues to get its direction from US stocks, which happened to lift last night by about 0.8 per cent,” CommSec analyst Steve Daghlian said.
“That’s helpful and that’s a reason why the market is up for the second straight day.”
Before the record close, Mr Daghlian said the ASX hadn’t been going anywhere in a hurry since hitting its best levels on June 16, trading in a narrow 200 point range.
“Part of the reason has been concern over the spread of the Delta variant of the coronavirus and of course lockdown uncertainty,” he said.
The fresh peak, however, came after discouraging news from Victoria, which recorded 26 new locally acquired cases – the state’s highest daily case number this year – while NSW had its worst day for this outbreak with 124 new cases.
The energy sector was the top performer, up 2.5 per cent.
Woodside rose 3.2 per cent to $22.58, Origin lifted 2.5 per cent to $4.48, Santos gained 2.59 per cent to $6.74 and its takeover target Oil Search firmed 0.99 per cent to $4.08.
The materials sector was second best, gaining 2.2 per cent.
BHP advanced 3.13 per cent to $51.45 after announcing a deal to supply Elon Musk’s Tesla with nickel from its Nickel West business in Western Australia, plus a collaboration to identify ways to reduce carbon emissions from their respective operations by using more renewable energy paired with battery storage.
Meanwhile, Ord Minnett said the probability of BHP exiting petroleum – as reported but not confirmed by the miner – was high but likely to be years away if it did eventuate.
Rival Rio Tinto added 1.22 per cent to $127.41.
As the profit reporting season approaches, Mr Daghlian and his economist colleagues Craig James and Ryan Felsman noted profit estimates for ASX200 companies had surged to levels last seen in 2008, driven by rocketing iron ore prices, resulting in earnings upgrades for materials companies.
With iron ore prices remaining around $US220 per tonne – more than 30 per cent above previous all-time highs – Westpac’s Robert Rennie suggests shareholders in BHP, Rio Tinto and Fortescue look set for record dividends.
Australian #ironore export values yet another record high in June at A$17.6bn, +A$910mn vs May record & +72%yy. Value of iron ore exports in Q2 up A$20bn versus same qtr last year! Will release model based fcast for July week after next, but price I am using for July +6% vs June. pic.twitter.com/ojsg322eey
— Robert Rennie (@Robert__Rennie) July 22, 2021
“Earnings results in the next six weeks should justify current lofty valuations of the Australian sharemarket,” CommSec says.
“The hard part is what comes next. Given the highly uncertain health and economic outlooks, we conservatively forecast the S&P/ASX 200 index to be in a range of 7,400-7,700 points by mid-2022.”
OMG chief executive Ivan Tchourilov said the lithium sector was “on fire”.
“The quarterly report released by Orocobre today really highlights the unique position the company is in to capitalise on the ever-growing demand for Australian lithium,” he said.
“This trend is showing no signs of slowing as the world ramps up electric vehicle production, of which lithium-ion batteries are a key ingredient.”
Orocobre leapt 9.9 per cent to $7.65.
Syrah Resources soared 10.09 per cent to $1.25 a day after releasing its quarterly report showing its production ramp-up of natural graphite – which is used to make lithium-ion batteries – was progressing ahead of plan, while disruption in the global container shipping market meant it could not meet all customer demand.
Piedmont Lithium soared 13.14 per cent to 77.5 cents after the ASX asked it to explain why its shares have been on a wild ride, plunging from 87 cents on Tuesday to 65 cents on Wednesday before entering a trading halt.
Piedmont responded there had been some media reports about local zoning and other approvals in Gaston County, North Carolina where it has an ambitious project, confirming it had met with the county on Tuesday for a “constructive work session meeting that the company was honoured to attend”.
The reports claimed the majority of county officials could block or delay the project over environmental concerns.
Another lithium miner, Galaxy Resources, advanced 9.5 per cent to $4.38 after its quarterly activities report went down nicely.
Engineering and construction group Cimic was again a strong performer, putting on 6.3 per cent to $21.10 after investors responded favourably to its half-year report released on Wednesday.
“After a few downgrades over the last 12 months, a lot of negativity has already been baked into the share price,” Mr Tchourilov said.
“This report had no surprises and no skeletons in the closet which has proven to be a ‘beat’ in the eyes of investors.”
Buy-now-pay-later provider Zip suffered a 7.78 per cent slump to $6.99 on the back of a business update.
Commonwealth Bank rose 1.48 per cent to $99.88 after Jefferies analysts upgraded the stock to a buy, from hold, saying it deserved a price premium compared to its peers because it operationally outperformed them, demonstrated by consistent disciplined housing/deposit market share growth.
ANZ appreciated 1.27 per cent to $28, National Australia Bank strengthened 1.17 per cent to $26.04 and Westpac improved 0.69 per cent to $24.93.
The Aussie dollar was fetching 73.71 US cents, 53.67 British pence and 62.45 Euro cents in afternoon trade.