Australian shares jump to 11-week high as travel stocks rebound from coronavirus

Australian shares have jumped to their highest value in almost three months as optimistic investors focused on the COVID-19 economic recovery, rather than US-China tensions.

The ASX 200 index leapt 2.2 per cent to close at 5,616 points.

The local share market has more than rebounded from its sharp losses last Friday (-1pc).

That was sparked by Washington rebuking Beijing for introducing national security laws, viewed as a threat to Hong Kong’s autonomy, and China’s decision to not give an economic growth forecast for the first time due to the uncertainty caused by the coronavirus pandemic.

Australia’s stock index outperformed its Asia-Pacific counterparts, the Shanghai Composite (-0.1pc), New Zealand’s NZX 50 (+1.1pc) and Japan’s Nikkei (+1.6pc).

Hong Kong’s benchmark index dropped (-0.7pc) to its lowest value in two months, having plunged 5.5 per cent on Friday, amid further pro-democracy protests.

Travel rebound

Nearly every stock on the benchmark index was trading higher on Monday, with some of the best performers being Webjet (+15.6pc), Flight Centre (+15.2pc), Qantas (+7.2pc) and the buy-now pay later fintech Afterpay (+9pc).

Travel stocks skyrocketed after Treasurer Josh Frydenberg raised the possibility that more stimulus could be on the way for the ailing sector.

“The tourism sector could be one sector in need of further support,” he told ABC News Breakfast.

However, Mr Frydenberg said there were no plans to expand the criteria or the timeframe for JobKeeeper and JobSeeker payments introduced during the pandemic.

This was despite the Federal Government admitting, on Friday, that it had overestimated the cost of the JobKeeper program by 46 per cent (or $60 billion).

Also lifting the market were the big four banks, led by NAB (+2.7pc), ANZ (+2.4pc), Westpac (+2.1pc) and Commonwealth Bank, which only rose by a modest 0.5 per cent.

The other major boost came from the mining giants, including Fortescue Metals (+1.9pc), BHP (+1.3pc) and Rio Tinto (+1.3pc).

Market divided on Afterpay

Afterpay shares closed at a record high of $48.50.

Its share price has soared by more than 40 per cent in the past four weeks, after revealing it had signed up 1 million new customers during the COVID-19 lockdowns, and that Chinese tech giant Tencent Holdings — which operates the social media app WeChat — bought a substantial 5 per cent stake in the company.

But market analysts are incredibly divided on Afterpay’s prospects. The young company has yet to make a profit, but is expanding in Australia, Britain and the United States.

Investment bank UBS believes the stock is significantly overvalued, maintaining its “sell” rating for Afterpay, but raising its price target slightly to $14.

“It’s uncertain, the potential scenarios remain wide,” UBS analyst Tom Beadle said.

“We see four key near-term impacts to varying degrees under different scenarios: a spike in bad debts; lower transaction frequency, lower customer growth, and potential impairment to long-term customer assumptions.”

During the coronavirus panic sell-off in late March, Afterpay shares plummeted to as low as $8.01, back to where they were in mid-2018.

Nine sells NZ business for 61 cents

Nine’s share price surged 7.3 per cent to $1.47 after the broadcaster sold its New Zealand media business, Stuff, for the paltry sum of 61 cents ($NZ1).

Stuff is one of New Zealand’s largest media companies, with 900 staff, and the buyer was its chief executive, Sinead Boucher.

Under this deal, Nine will retain its ownership of a printing plant in Petone, Wellington — where Stuff prints some of its newspapers — and will lease it back to the New Zealand company.

Ms Boucher said the move would ensure “a sustainable future for local journalism” and that staff would take a “direct stake in the business as shareholders”.

The sale comes amid a steep fall in advertising revenue, causing job losses across the media industry.

Dollar dips on weaker exports

The Australian dollar briefly dipped to 65.24 US cents shortly before midday, after trading as high as 65.48 US cents in the morning.

This was after the Bureau of Statistics published preliminary trade data, showing Australia’s exports had dropped 12 per cent (or $4 billion) in April to $31.4 billion — a sharp fall compared to March’s record high.

But the ABS said demand for resources commodities, like iron ore and gas, remained strong.

The 47 per cent plunge in non-monetary gold exports (including gold coins, bullion and ingots) was a major reason for the weaker figures.

The local currency had since lifted back to 65.27 US cents.

Oil prices rebound by two-thirds

Every sector was trading higher, with the best performers being industrial, consumer discretionary and utilities.

Energy stocks also lifted sharply as Brent crude futures rose (+0.7pc) to $US35.37 per barrel.

In the past four weeks, the price of international oil benchmark surged by 65 per cent.

“Real-time analytics queries are providing empirical evidence that automobile use is quickly returning to a state of pre-COVID-19 normalcy, which is unequivocally positive for oil prices,” said AxiCorp’s chief global market strategist Stephen Innes.

“Another great week of gains for oil, although the sharp rally was temporarily interrupted ahead of the US and UK long weekend as traders reflected on China news flow.”

On Monday, Wall Street will be closed for Memorial Day, while British markets will be shut for the Spring Bank public holiday.

“The National People’s Congress announced economic measures were interpreted less dovish than expected and proposed security legislation for Hong Kong weighed on sentiment,” Mr Innes said.

China announced a $430 billion stimulus package on Friday, in a bid to reinvigorate China’s stalled economy.

“The total size of the announced stimulus package is about 3.5 per cent of GDP, which falls short of the market expectation of 5-6 per cent of GDP.”

Iron ore futures fell (-0.6pc) to $US97.65 a tonne, its highest value in around nine months.

Spot gold slipped (-0.4pc) to $US1,726.82 an ounce, but is still trading near a seven-year high.

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