australian stocks give up gains after the sharp fall on the shanghai share market 906522015

The Australian share market moved up sharply Monday at the open, but gave up most of its gains in a decline that commenced shortly before noon and continued until the dying hours of trade. On the bright side, stocks managed to post a day of gains after a string of losses.

The S&P/ASX 200 gained just 9.9 points, or 0.2 per cent, to close higher at 5,309.1, while the broader All Ordinaries index closed 10.2 points higher, or up 0.2 per cent to 5,289. The sectors which ended in the black were materials (+1.27 per cent), energy (+1.06 per cent) and health (+0.51 per cent), while the biggest losers were telecom (-0.69 per cent), consumer staples (-0.66 per cent) and utilities (-0.3 per cent).

The initial surge in the market was led by the energy and materials sectors following a recovery in commodity prices and Friday’s gains on Wall Street. However, the market was weighed down by a sharp decline of 6.5 per cent in Chinese stocks triggered by a government crackdown on margin trading in the country’s stock markets.

Amongst resources stocks, BHP Billiton Ltd (ASX:BHP) shot up 2.4 per cent to $37.71, Rio Tinto Ltd (ASX:RIO) ended higher by 0.5 per cent to $54.16 and Fortescue Metals Group Ltd (ASX:FMG) declined 1.3 per cent to $2.28.

A 5 per cent rise in crude oil prices helped Wall Street stocks rally on Friday and this had a knock-on effect on Australian energy shares. Santos Ltd (ASX:STO) gained 0.67 per cent to $7.54 and Oil Search Ltd (ASX:OSH) surged 4.9 per cent to $7.49.

This took the shine off airline stocks as Qantas Airways Ltd (ASX:QAN) plunged 2.6 per cent to $2.25 and Virgin Australia Holdings Ltd (ASX:VAH) fell 1.12 per cent to $0.440.

With the exception of Australia and New Zealand Banking Group (ASX:ANZ), which gained 0.06 per cent to $31.28, the other three major banks ended in the red for the day. Commonwealth Bank of Australia (ASX:CBA) was down 0.56 per cent to $83.10, National Australia Bank Ltd (ASX:NAB) fell 0.15 per cent to 33.32 and Westpac Banking Corp (ASX:WBC) slipped 0.4 per cent to $32.60.

Macquarie Group Ltd (ASX:MQG) shot up 5.35 per cent to $58.25 after the investment bank upgraded its profit outlook for the year ended 31 March 2015, saying better trading conditions and the lower Australian dollar could boost profit between 10 per cent and 20 per cent. Ozforex Group Ltd (ASX:OFX), which provides online international payment services for consumer and business clients, was the biggest loser on the S&P/ASX 200, falling 10.33 per cent to $2.43 in highly volatile trade on news that Westpac Banking Corp (ASX:WBC) will no longer provide it with banking services.

Last week’s plunge in bond yields has made high dividend paying stocks (“bond like equities”) such as the major Australian banks attractive, according to stockbroker Charlie Aitken. "With benign bad debts, [net interest margins] maintained, falling wholesale funding costs and quantified regulatory capital risk, the sector now looks primed for total return outperformance,” he told clients in his widely-read note "Ringing the Bell," according to The Sydney Morning Herald. “Prospective dividend yield alone will support the sector at current share prices," he added.

Sales of new cars in Australia were up a seasonally adjusted 3 per cent to 94,903 during the month of December according to data from the Australian Bureau of Statistics, as reported by Business Spectator. According to analysts, sales received a boost from higher jobs growth near the end of 2014, as well as aggressive discounting from car dealers. Consumers may also have brought forward car purchases fearing higher prices down the road due to the falling value in the Australian dollar.

Inflation during the month of December remained low according to data from the TD Securities-Melbourne Institute inflation gauge. On a month-to-month basis, inflation was up just 0.1 per cent in December, the same as November, as cheap fuel weighed on prices, according to the ABC. Year-on-year, inflation rose just 1.5 per cent. Official inflation data for the December quarter will be released by the Australian Bureau of Statistics next week. Low inflation boosts the case for cutting interest rates by the Reserve Bank of Australia.

European stocks ended the day mostly higher, though the US markets were closed for a holiday. China is again going to play a major role in the fortunes of global stock markets as it releases much awaited data on GDP today.

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