australian share market gains 0 5 per cent as global stocks rally 905542015

Stocks in the energy sector fall despite higher oil prices

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By :  ,  Financial Analyst

The Australian share market ended Thursday with gains of about 0.5 per cent, with sentiments aided by an overnight rise in the price of oil, a higher finish on Wall Street and a positive global reception to the minutes from the US Federal reserve meeting. The S&P/ASX 200 rose 27.9 points, or 0.52 per cent, to 5,381.5 points, while the broader All Ordinaries index gained 24.9 points, or 0.47 per cent, to 5,359.4 points.

The market appeared to be enjoying a relief rally, according to Scott Schuberg, Chief Executive of Rivkin, speaking to The Australian. “Similar to the iron issues that we had in 2014, we are only seeing the biggest oil producers get through this unscathed,” he said. “So while there is a small bounce in commodities it’s bringing about some sentimental relief but it’s not convincing the market that there is a substantial change.”

The information technology, telecommunications services and utilities sectors gained 1.78, 1.13 and 1.06 per cent respectively. Energy was the biggest loser at -0.66 per cent despite better oil prices. Santos Ltd (ASX:STO) closed lower by 2.01 per cent to AU$7.30, Woodside Petroleum Ltd (ASX:WPL) lost 0.5 percent to AU$35.96 and Oil Search Ltd (ASX:OSH) declined 1.53 per cent to AU$7.09.

A World Bank report said the slump in oil prices is likely to boost the global economy, and substantially benefit countries that import crude. It estimated that a 10 per cent drop in oil prices would have a positive effect on GDP in these countries from 0.1 per cent to 0.5 per cent, as reported by The Sydney Morning Herald. On the flip side, growth would suffer in oil exporting countries and this could have serious implications for emerging markets which depended to a large extent on petrodollars to boost financial market liquidity and keep borrowing costs down.

The materials sector moved higher to offset losses from the energy sector. BHP Billiton Ltd (ASX:BHP) shot up 0.96 per cent to AU$28.38 and Rio Tinto Ltd (ASX:RIO) lifted 2.37 per cent to AU$58.65. According to Dow Jones Newswires, US investment bank Jefferies has recommended that clients buy shares in Rio Tinto Ltd (ASX:RIO) based on expectations of a dividend increase and a stock repurchase proposal at its full-year results in February.

Amongst junior miners Arrium Ltd (ASX:ARI) shot up 15.69 per cent to end at AU$0.295. The stock was also the biggest gainer on the ASX yesterday, as it was the day before, and has surged by over 31 per cent in the last two trading sessions.

The four largest banks all ended in the black. Australia and New Zealand Banking Group (ASX:ANZ) was up 0.6 per cent to AU$31.91, Commonwealth Bank of Australia (ASX:CBA) gained 0.80 per cent to AU$85.39, Westpac Banking Corp (ASX:WBC) lifted 0.37 per cent to AU$32.81 and National Australia Bank Ltd (ASX:NAB) rose 0.9 per cent to AU$33.72.

Franklin Resources, the largest shareholder in Qantas Airways Limited (ASX:QAN), reduced its holdings in the airline for the second time in a month as it moved to book profit in the recent share price rally. However, the investor still continues to own a 14.2 per cent chunk of Qantas, down from 16 per cent at the beginning of December.

November data on building approvals showed that home-building activity continues at a good pace in Australia. Approvals for constructing new homes jumped 7.5 per cent in November versus the consensus estimate for a 3 per cent fall according to The Australian. A total of 18,245 approvals were granted, as per data from the Australian Bureau of Statistics, the highest issued in a month since records started in the 1980s.

The housing data had a bullish impact on the Australian dollar, which rose nearly 0.20 US cents after the figures were released, while the shares of building firms gained. Boral Ltd (ASX:BLD) shot up 0.75 per cent to AU$5.40 and shares in building materials producer CSR Ltd (ASX:CSR) rose 1.06 per cent to close at AU$3.82.

The Commonwealth Bank of Australia (ASX:CBA) updated its take on interest rates during 2015, according to International Business Times. The bank now considers it “quite likely” that the RBA will not touch interest rates during 2015. However, data from research house Investment Trends indicates that the number of investors expecting the RBA to cut rates next month jumped from 4 per cent in August to 30 per cent in December, primarily due to fears of a weakening economy, as reported by The Sydney Morning Herald.

Find up to date information on the ASX at City Index.

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