australian stocks end higher as investors scoop up energy and mining shares 905612015

Iron ore prices again fall below $70 on fears of poor growth in Chinese demand

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By :  ,  Financial Analyst

The Australian share market did well for itself on the last day of the week, clocking a rise of over 1.5 per cent following overnight gains on Wall Street and steadying oil prices. The S&P/ASX 200 was up 84.0 points, or 1.56 per cent, to 5,465.6 and the broader All Ordinaries index rose 87.0 points, or 1.5 per cent, to 5,440.1.

Every sector ended in the black, the biggest gainers being energy, information technology, materials and consumer staples, which rose 3.15, 2.80, 2.25 and 2.01 per cent respectively.

Though Brent crude finished 8 per cent lower for the week, Australian shares were up 0.5 per cent during the same period. The energy sector chalked up stellar gains on Friday as investors piled into stocks such as Woodside Petroleum Ltd (ASX:WPL) which rose 3.03 per cent to $37.05, Santos Ltd (ASX:STO) which ended higher by 5.34 per cent to $7.69 and Oil Search Ltd (ASX:OSH), up 3.67 per cent to AU$7.35. "We're re-treading that path where stocks drop when oil prices fall, then rebound once the oil price stabilises a little," Mizuho Trust & Banking senior strategist Hitoshi Asaoka observed, according to The Sydney Morning Herald. A report on Friday by oil analysis firm Wood Mackenzie said that even at sub-$40 levels, less than 2 per cent of global crude production was at risk of making losses, the paper reported.

However, this enthusiasm did not carry forward into the M&A space, where Apache Corporation (NYSE:APA) had to call off an auction of its remaining oil and gas assets in Western Australia as potential buyers vanished in the face of falling oil prices, according to the Business Spectator. However, Woodside entered into an understanding with Indian business conglomerate, the Adani Group, to jointly tap developing new business opportunities in the LNG market in India.

Miners too had their share of bargain-hunting on Friday as BHP Billiton Ltd (ASX:BHP) jumped 2.75 per cent to AU$29.16, Rio Tinto Ltd (ASX:RIO) rose 1.28 per cent to AU$59.40 and Fortescue Metals Group Ltd (ASX:FMG) put on a solid 4.12 per cent to AU$2.78.

According to a report in The Australian this morning, iron ore prices have again slipped below US$70 per tonne, raising apprehensions that the recent rebound in prices may have been just a bear rally and that Chinese demand growth will continue to stay soft in the coming year as the country restructures its economy.          

Retail trade was up a tepid 0.1 per cent in November, missing the consensus Bloomberg estimate of a 0.2 per cent rise. The modest gain was driven by higher sales in grocery, food and takeaway sectors, according to data from the Bureau of Statistics. RBC economist Michael Turner, quoted by ABC, said retail sales over the past year have grown at a satisfactory 5 per cent per annum owing chiefly to a wealth effect as a healthier asset side of the balance sheet has given consumers enough confidence to save less and spend some more.

Not surprisingly, shares in retailers did well on Friday with Wesfarmers Ltd (ASX:WES) and Woolworths Ltd (ASX:WOW) both rising about 2 per cent. Furniture and homewares retailer Harvey Norman Holdings Ltd (ASX:HVN) headed higher by nearly 4 per cent to AU$3.47.

On Friday, the Australian dollar staged a smart recovery after US non-farm payrolls showed an improvement in hiring but poor growth in wages rate. The seemingly unstoppable rally in the US Dollar Index paused, and the Aussie shrugged off declines in oil and copper to move up from below 81 US cents to over 82 US cents. As at 08:44 this morning (AEDT) the currency was trading at 82.02 US cents.

Australia and New Zealand Banking Group (ASX:ANZ) meanwhile indicated its support of a plan for a national examination for financial planners. “ANZ supports recommendations of the Financial Systems Inquiry to lift education, training and competency standards for financial advisers to achieve consistent high quality advice outcomes and to build consumer trust across the industry,” the bank said in a submission to a federal government inquiry.

Australian stocks may open weaker today, given that at 06:45 (AEDT), the March share price index futures contract was down 40 points at 5,382.

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

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