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Markets stage rebound to end Red October

Australian Associated Press
Image: Getty
Image: Getty

October has been a frightful month for investors so far, but tech and internet stocks helped Wall Street gain ground overnight to put some gloss on a horror month.

ASX: The opening bell

Australian shares are ahead at the open following overnight gains on Wall Street and a five per cent surge in BHP after the mining giant announced it would return $14.7 billion to shareholders.

BHP stocks jumped by as much as $1.99 to $34.20 at the open, lifting the materials sector and the wider market, but losses for energy and telco stocks held back progress.

The benchmark S&P/ASX200 index is up 26.8 points, or 0.46 per cent, to 5,857.1 at 1030 AEDT on Thursday, while the broader All Ordinaries rose 26.0 points, or 0.44 per cent, to 5,939.3.

The Australian dollar is buying 70.79 US cents, down from 70.89 on Wednesday.

AMP shares also soared early on speculation Macquarie Group was eyeing a takeover, with stocks in the under-fire wealth manager up by as much as 7.7 per cent early to $2.66.

The wider financial sector is up, with NAB rising 1.13 per cent to $25.495 on the positive news buried within the announcement of a 14.2 per cent drop in full-year profit due to restructuring costs and customer remediation.

Commonwealth and Westpac are down 0.27 and 0.07 respectively, but ANZ gained 0.35 per cent to $26.02 after Wednesday’s beating.

Materials were up after BHP announced a $US5.2 billion share buyback to start immediately and a subsequent $US5.2 billion special dividend to be calculated on December 17.

Rio Tinto also gained early, rising 2.32 per cent to $78.17, while Fortescue Metals, Bluescope Steel, and South32 were ahead 2.13, 1.46 and 0.55 per cent respectively.

Energy stocks are down after oil prices posted the worst monthly performance since mid-2016 on evidence of rising global crude supply.

Telstra shares have also taken an early hit, down 1.46 per cent to $3.035, while healthcare giant CSL is down 0.27 per cent to $187.50.

Woolworths shares were up 1.44 per cent despite the removal of single-use plastic bags keeping comparable growth steady at 1.8 per cent to $9.87 billion.

US stocks rebound

The S&P 500 and the Nasdaq posted their first two-day gain this month, as Facebook led a slew of encouraging earnings reports that boosted sentiment at the end of a tumultuous October for global markets.

Shares of Facebook jumped 6.2 per cent after the social media giant eased investor concerns by forecasting that margins would stop shrinking after 2019 as costs from scandals ease up.

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Facebook reported a second-straight quarter of record-low user growth, confirming fears of slowing growth, but analysts said the results were not as bad as feared.

That brought some relief to the so-called FANG group of high-growth internet stocks. Amazon rose 4.1 per cent on Wednesday, Netflix climbed 6.8 per cent and Google-parent Alphabet gained 3.9 per cent.

The S&P technology index rose 2.22 per cent, leading gains among the major S&P indexes, while the S&P communication services index jumped 2.46 per cent.

“Some continuation of yesterday’s strength with pretty good results in the last hour, so this momentum is expected to continue today,” said Scott Brown, chief economist at Raymond James in St Petersburg, Florida.

“There is more comfort right now at least and less anxiety since we’re finishing out the month.”

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The FANG group and Apple have led the slide on Wall Street this month, which has left the S&P 500 and Dow Industrials with barely any gains for the year, fanned by concerns over trade, higher borrowing and wage costs, fears of corporate earnings peaking and a host of geopolitical worries.

The S&P 500 closing is set to lock near 7 per cent loss for October, its worst monthly performance in over seven years.

At 9.56am local time, the Dow Jones Industrial Average was up 276.97 points, or 1.11 per cent, at 25,151.61, the S&P 500 was up 34.55 points, or 1.29 per cent, at 2,717.18. The Nasdaq Composite was up 146.67 points, or 2.05 per cent, at 7,308.32.

The ADP national employment report showed private payrolls increased by 227,000 this month, the highest rise since February.

It comes ahead of the more comprehensive non-farm payrolls report on Friday.

Also read: Why the Aussie property market WON’T crash

But data also showed US labour costs accelerated in the third quarter as wages for both private and government workers surged amid tightening labour market conditions.

Strong earnings reports from companies including General Motors, Yum Brands and Estee Lauder, all of which have a fair share of exposure to China, also boosted sentiment.

General Motors jumped 6.9 per cent after the car maker’s robust quarterly results and forecast.

Yum Brands was up 2.7 per cent and Yum China Holdings rose 14.1 per cent as strong KFC sales drove results.

Estee Lauder gained 7.2 per cent after the cosmetics maker said strong demand in Asia boosted quarterly results and full-year profit outlook.

Defensive sectors were the only decliners, with the S&P consumer staples index falling 1.26 per cent, dragged down by losses in Kellogg.

Kellogg fell 8 per cent after cutting its full-year profit outlook due to higher advertising and distribution costs.

Advancing issues outnumbered decliners by a 2.54-to-1 ratio on the NYSE and by a 2.97-to-1 ratio on the Nasdaq.

The S&P index recorded six new 52-week highs and two new lows, while the Nasdaq recorded 17 new highs and 35 new lows.

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