From rout to rally, RBA's path to normalisation: ASX closes 1.2% higher

A positive lead from Wall St rubbed off on the Aussie bourse after investors digested another day of dialogue from the Reserve Bank. The local market gained for its second straight session to a six day high underpinned by gains from the resources sector. Enticing the bulls on the ASX was the US futures lifting with the tech index looking optimistic after Google parent Alphabet soared 9 per cent on its stock split plan.

The speech by RBA governor Philip Lowe at the National Press Club reinforced that ‘it is still too early’ to tell whether inflation will remain elevated and that the central bank is “prepared to be patient”, adding that “as we navigate towards full employment, we have scope to take the time to distill the balance between supply and demand in the economy.”

He said that “over time and as conditions allow”, policymakers will “need to navigate a return to more normal settings of monetary policy”. Dr Lowe did acknowledge that under certain circumstances, a rate hike later this year is "plausible". Investors now await for the RBA to release its quarterly statement on monetary policy and latest forecasts on Friday.

While Asian markets are closed for Lunar New Year, except Japan, shares in the nation’s largest weight on the index, BHP (ASX:BHP) roared higher by 1.6 per cent to $45.64 starting its first month on the local bourse after delisting from London’s stock exchange. Fortescue Metals Group (ASX:FMG) surged 3.7 per cent at $20.46, while Rio Tinto (ASX:RIO) closed 2.3 per cent higher at $111.43.

Energy stocks rallied as the oil price danced around multi-year highs supporting Woodside Petroleum’s (ASX:WPL) leap by 3.3 per cent at $25.89, Santos (ASX:STO) jumped 2.7 per cent at $1.51 while Beach Energy (ASX:BPT) closed 2.7 per cent higher at $1.51.

Meanwhile, Telstra (ASX:TLS) rose 1 per cent at $3.98 after unveiling its plans for an additional capital expenditure spend of $1.4 to $1.6 billion over five years on two projects. One project consists of the construction of a fibre network and ground infrastructure as part of a 16.5 year contract with American satellite broadband provider Viasat, while the second program is an expansion of its inter-city optical fibre network by 20,000 kilometres.

Amcor (ASX:AMC) tumbled 3.5 per cent to $16.36 after the packaging company posted half-yearly results which missed expectations on some parts. The company posted a 12 per cent rise in revenue above expectations but a 3 per cent leap in profits, and a 4 per cent gain in its EBIT, came in below. Amcor also recorded a 62 per cent decline in its free cash flow compared to the prior corresponding period. They were the third worst performing stock in the session.

Elsewhere, the tech sector closed flat, weighed down by Block (ASX:SQ2) falling 5.6 per cent to $161.55 while financials and consumer discretionary sectors came equal third in the leaderboard.

Macquarie Bank (ASX:MQG) rose 2 per cent at $192.43, ANZ (ASX:ANZ) added 1.4 per cent to $26.89, Commonwealth Bank (ASX:CBA) up 0.9 per cent to $94.74, National Australia Bank (ASX:NAB) firmed by 0.8 per cent to $27.87, while Westpac (ASX:WBC) rallied 1 per cent to close at $20.60.

Beacon Lighting (ASX:BLX) surged 7.8 per cent to $2.99 and City Chic (ASX:CCX) jumped 3.7 per cent to $5.33 in the discretionary sector.

A fruitful start to February has buoyed investor’s optimism following violent swings in January pushed by nerves on imminent interest rate hikes by global central banks.

Dip buyers have come in to snap up beaten down stocks amid profit updates helping ease uncertainty for now. Though the Bank of England and European central bank rate decisions loom while the big US jobs report is due on Friday. All this could be enough to light up the volatility match.

With mounting concerns between Russia and Ukraine and an Olympic games around the corner, we can’t forget that the kryptonite to maintaining the momentum in economic growth is another Covid strain. Let’s hope that the sister strain of Omicron doesn’t cause havoc.

At the closing bell, the S&P/ASX 200 was 1.2 per cent or 82 points higher at 7,088.

Futures

The Dow Jones futures are pointing to a rise of 6 points.
The S&P 500 futures are pointing to a rise of 24 points.
The Nasdaq futures are pointing to a rise of 162 points.
The SPI futures are pointing to a rise of 79 points when the market next opens.

Best and worst performers

The best-performing sector was Energy, up 2.8 per cent. The worst-performing sector was Utilities, down 0.4 per cent.

The best-performing stock in the S&P/ASX 200 was Champion Iron (ASX:CIA), closing 6.2 per cent higher at $6.73. It was followed by shares in Auckland International (ASX:AIA) and Worley (ASX:WOR).

The worst-performing stock in the S&P/ASX 200 was Credit Corp Group (ASX:CCP), closing 6.3 per cent lower at $32.65. It was followed by shares in Block (ASX:SQ2) and Amcor (ASX:AMC).

Asian markets

Japan's Nikkei has gained 1.7 per cent.
Hong Kong's Hang Seng is closed due to Chinese New Year.
China's Shanghai Composite is closed due to Chinese New Year.

Commodities and the dollar

Gold is trading at US$1798.30 an ounce.
Light crude is trading $0.32 higher at US$88.52 a barrel.
One Australian dollar is buying 71.39 US cents.