Locally, Mercury NZ soared 6.6 per cent to become the best-performing mega-cap stock, followed by Meridian Energy (up 4 per cent) and GQG Partners (up 3.2 per cent).

The laggards

On the flip side, online jobs marketplace Seek gave back some of Wednesday’s 4.8 per cent gain. Its shares ended the trading session down 2.8 per cent. Fisher & Paykel Healthcare (down 1.9 per cent), Spark New Zealand (down 1.6 per cent) and Auckland International Airport (down 0.8 per cent) were also among the biggest large-cap decliners.

Rio Tinto shares, which fell 0.9 per cent on Wednesday, extended their decline and were again 0.9 per cent lower. Mineral Resources shares fell 0.3 per cent after the company revealed it had sold a 49 per cent interest in the Onslow iron ore project’s dedicated haul road to Morgan Stanley Infrastructure Partners for $1.3 billion.

The lowdown

IG Australia market analyst Tony Sycamore said the sharemarket took its lead from a thumping session on Wall Street overnight and enjoyed broad-based gains.

“The rally on Wall Street was triggered by a combination of soft US labour market data and a 25bp rate cut by the Bank of Canada,” she said. “Closer to home, yesterday’s tepid first quarter Australian GDP reading has heightened expectations that the RBA will cut rates before year-end.”

Sycamore said the ASX interest rate-sensitive financial sector has surged 3 per cent over the week, despite most analysts having “sell” or “underweight” ratings on the big banks. CBA shares jumped another 1.1 per cent on Thursday and are up more than 4.8 per cent in the past four trading sessions.

On Wall Street, Treasury 10-year bond yields dropped five basis points to 4.28 per cent.

The Canadian dollar fell after the Bank of Canada became the first Group of Seven central bank to kick off interest rate cuts, boosting hopes others will follow.

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“The slow and steady march higher for equity markets continues to confound the bears,” said Mark Hackett at Nationwide. “The latest stretch is being attributed to shifting views of Fed policy, though the more accurate reason is that buying pressure from retail and institutional investors, share buybacks, and growing M&A activity provides a healthy backdrop.”

The S&P 500 Index rose 1.2 per cent to 5354.03, while the Dow Jones Industrial Average, which has less of an emphasis on tech companies, lagged the overall market with a gain of 0.2 per cent.

Nvidia shares soared 5.2 per cent to a record $US1224.40, making it the first computer-chip company to hit $US3 trillion in market capitalisation. The company’s shares have rallied almost 150 per cent this year, as the insatiable demand for its chips – used to power AI tasks – continues to rocket.

A “wall of money” from passive equity allocations will pour into the sharemarket in early July, setting up a continuing rally through the early summer, said Goldman Sachs’ Scott Rubner.

Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities, according to Rubner. The S&P 500 has been positive in July for nine straight years, posting an average return of 3.7 per cent. The Nasdaq 100 has an even better record, posting gains in 16 straight Julys, with an average return of 4.6 per cent.

Investors are refocusing on large caps, and for good reason, according to Ed Clissold at Ned Davis Research. After a strong May, the top 10 stocks account for 35.7 per cent of the S&P 500 Index’s market capitalisation – a record since at least 1972, he noted.

“US megacaps have become investor favourites due to their ability to generate enough cash flow to both reinvest it into their businesses, with AI being the recent favourite, and return it to shareholders via dividends and buybacks,” Clissold said.

Quote of the day

“Many in the fossil-fuel industry have shamelessly greenwashed, even as they have sought to delay climate action – with lobbying, legal threats, and massive ad campaigns,” said UN Secretary General Antonio Guterres, who said advertisements for fossil-fuel companies should be banned to prevent “climate hell”.

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Bloomberg, with staff writers