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ASX climbs as bank deal boosts Wall Street; miners gain after lithium bid
ASX climbs as bank deal boosts Wall Street; miners gain after lithium bid,An agreement by First Citizens to buy the collapsed Silicon Valley Bank has calmed Wall Street, buoying the Australian sharemarket, which has also been bolstered by mining stocks.

ASX climbs as bank deal boosts Wall Street; miners gain after lithium bid

Welcome to your five-minute recap of the trading day, and how experts saw it.

The numbers:

The Australian sharemarket climbed on Tuesday after family-run First Citizens Bank said it would buy most of the collapsed Silicon Valley Bank, guiding Wall Street to a steady close, and as excitement built in the lithium sector after a $5.5 billion takeover bid for Liontown Resources.

The S&P/ASX 200 was up 72.1 points, or 1 per cent, to 7034.1 at the close, buoyed by energy and materials sectors.

The ASX closed 1 per cent higher.

The ASX closed 1 per cent higher.Credit:Louie Douvis

The lifters:

The energy sector lifted 4.1 per cent on the back of surging oil prices, bolstered by gains in Woodside (up 4.8 per cent) and Santos (up 3.1 per cent). The materials sector gained 2.2 per cent, led by lithium miner Allkem (up 13.7 per cent), Pilbara Minerals (up 11.9 per cent) and Mineral Resources (up 6 per cent). Mining heavyweights BHP (up 2 per cent) and Fortescue (up 1.2 per cent) also lifted the index.

The laggards:

Accounting software company Xero (down 2.9 per cent) was the biggest large-cap decliner on the back of increased concern about its balance sheet and cautious trading in the information technology sector (down 0.6 per cent) overall. The healthcare sector (down 0.9 per cent) also fell as biotechnology company CSL (down 1.4 per cent) and Ramsay Healthcare (down 0.8 per cent) both dropped.

The lowdown:

Jessica Amir, market strategist at Saxo Markets, said lithium companies were the clear highlight in Tuesday’s trading amid a broader pickup in Australian markets.

“It’s been a phenomenal day for the Aussie sharemarket, especially for lithium investors who have been gritting their teeth,” she said. “The extraordinary gains in the lithium sector were because the world’s biggest lithium company lobbed a takeover bid on Liontown Resources.”

While lithium prices have tumbled in the past few months, Amir said they could still pick up later this year as numerous new names start producing electric vehicles, which use the material in batteries.

Amir also said an increase in M&A activity was boosting the local sharemarket. “The Aussie sharemarket has been depressed for some time, so companies with strong cash flows are prime targets,” she said.

The healthcare sector, on the other hand, saw a negative shift in sentiment. “Healthcare companies typically benefit in recessionary climates and have done well recently, so naturally there’s some profit-taking in the sector now,” Amir said.

Meanwhile, the technology sector fell ahead of Australia’s monthly reading on inflation to be released on Wednesday.

“There’s some contagion fears because technology companies do it really tough when interest rates are rising,” Amir said. “There’s the risk that inflation will be hotter than expected, and that the tech sector will suffer, with potentially more redundancies coming,” she said.

On Wall Street, a choppy day ended with stocks mostly higher on Monday, as battered banks showed more strength, at least for now.

The S&P 500 eked out a 0.2 per cent gain after having been up by as much as 0.8 per cent. Banks and energy stocks led gains in the benchmark index, outweighing losses in technology and communications companies.


The Dow Jones Industrial Average rose 0.6 per cent, while the Nasdaq composite fell 0.5 per cent, reflecting losses in Google parent Alphabet and other tech companies.

The S&P and Nasdaq are coming off two straight weekly gains, even as markets have been in turmoil following the second- and third-largest US bank failures in history earlier this month. Investors have been hunting for which banks could be next to fall as the system creaks under the pressure of much higher interest rates.

Still, financial stocks were among the biggest gainers on Monday. First Citizens’ stock soared 53.7 per cent after it said it would buy most of Silicon Valley Bank, whose failure sparked the industry’s furore this month. As part of the deal, the Federal Deposit Insurance Corp agreed to share some of the losses that may arise from some of the loans First Citizens is buying.

Other banks that had been highlighted as the next potential victims of a debilitating exodus of customers also strengthened.

First Republic Bank jumped 11.8 per cent and PacWest Bancorp rose 3.5 per cent. Most of the focus in the US has been on banks that are below the size of those that are seen as “too big to fail”.

The failure of US regional banks Silicon Valley Bank and Signature Bank early this month triggered turmoil in the banking system.

The failure of US regional banks Silicon Valley Bank and Signature Bank early this month triggered turmoil in the banking system.Credit:Bloomberg

A broader worry has been that all the weakness for banks could cause a pullback in lending to small and mid-sized businesses across the country. That in turn could lead to less hiring, less growth and a higher risk of a recession. Many economists were already expecting an economic downturn before all the struggles for banks.

The worries are international. In Europe, Credit Suisse’s stock tumbled so quickly this month that regulators brokered its takeover by rival Swiss banking giant UBS. At the end of last week, investors’ sights set on Deutsche Bank, whose stock fell sharply as analysts questioned why it had come under pressure.


On Monday, Deutsche Bank shares rose 6.1 per cent in Germany. Other big banks across Europe also found some stability. These giant banks don’t share many characteristics with the smaller and mid-sized banks in the United States that have been under pressure. But all are navigating much more scrutiny from investors broadly. Their world has become much more difficult because interest rates have jumped very high very quickly.

The Federal Reserve and other central banks announced their latest increases to interest rates in recent weeks as they fight inflation that’s still gripping worldwide. Higher rates can undercut inflation by slowing the economy, but they raise the risk of a recession. They also hurt prices for stocks, bonds and other investments.

Huge, quick swings in expectations for the Fed have caused historic-sized moves in the bond market.

Yields jumped on Monday in their latest lunge. The yield on the 10-year Treasury, which helps set rates for mortgages and other important loans, rose to 3.53 per cent from 3.37 per cent late on Friday. It was above 4 per cent earlier this month.

Tweet of the day:

Quote of the day:

“People are now at constant risk of identity fraud—and worse—because organisations collect too much information, keep it too long, and store it insecurely,” said digital privacy group Electronic Frontier Australia’s chair Justin Warren amid growing backlash against lax corporate cybersecurity in Australia.

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One of the world’s largest lithium producers has sparked a resurgence in dwindling lithium stocks after it lobbed an audacious $5.5 billion takeover bid at West Australia’s Liontown Resources, an offer the miner’s board has promptly rejected.

With AP

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