australian stocks grind lower though gold stocks rule firm 905942015

The Australian share market ended lower for the second consecutive day this week due to new downturns in the prices of oil and iron ore.

The S&P/ASX 200 lost 18 points, or 0.3 per cent, to close at 5,404.7, while the All Ordinaries index gave up 17.4 points, or 0.3 per cent to end the session at 5,382.10.

Amongst sectors, energy was unsurprisingly the largest loser at 1.73 per cent, followed by losses of 0.91 per cent and 0.53 per cent in the materials and information technology sectors respectively. The telecommunications sector was the largest and only significant gainer at 1.06 per cent.

In energy stocks, Woodside Petroleum Ltd (ASX:WPL) was down 1.7 per cent to $35.72, Oil Search Ltd (ASX:OSH) lost 2.2 per cent to $7.14, and Santos Ltd (ASX:STO) declined 1.1 per cent to $7.21, as crude oil prices continued to fall to fresh lows. Overnight, oil fell 5 per cent to nearly six-year lows before correcting somewhat, and Brent crude at one point traded on par with US crude, according to Reuters.

Oil has been thrown into a fresh bearish spin after leading research firms downgraded their price targets for 2015 and onwards. An article in The Sydney Morning Herald, published after market close, said that analysts at JP Morgan expected dividends from Woodside Petroleum Ltd (ASX:WPL) for the 2015 financial year to be cut sharply due to the steep fall in oil prices.

However, the favourable impact of low oil prices is likely to feed in to the economy in the latter half of the year, according to AMP Capital Chief Economist Shane Oliver. "I think the lower oil price will help drive shares higher this year," he said, but not before a "10-15 per cent" correction in shares over the months ahead, reported The Sydney Morning Herald.

Inspired by BG Group's (LON:BG) AU$6.1 billion sale of its Queensland Curtis LNG pipeline to APA Group (ASX:APA), oil producer Santos Ltd (ASX:STO), which is reeling from the plunge in oil prices, said it is evaluating the feasibility of selling its own Gladstone LNG pipeline, according to Sky News.

In resource stocks, BHP Billiton Ltd (ASX:BHP) lost 1.89 per cent to AU$27.97, Rio Tinto Ltd (ASX:RIO) gave up 1.78 per cent to AU$57.46 and Fortescue Metals Group Ltd (ASX:FMG) lost a sizeable 5.20 per cent to close at AU$2.55. The smaller iron ore miners were hit especially hard, with Atlas Iron Limited (ASX:AGO) plunging 11.11 per cent to AU$0.20 and Mount Gibson Iron Ltd (ASX:MGX) down 11.32 per cent to AU$0.235. The Australian reported yesterday morning that iron ore prices resumed their downtrend with a fresh, nearly 2 per cent fall in the latest offshore trading session.

Gold stocks, however, were firm in Monday’s trading following a rally in gold prices. Newcrest Mining Ltd (ASX:NCM) was up 3.77 per cent to AU$12.95, and Evolution Mining (ASX:EVN) was the top gainer on the S&P/ASX 200, rising 8.98 per cent to AU$0.91.

The telecommunications sector was driven higher by Telstra Corporation Ltd (ASX:TLS) which jumped 1.16 per cent to AU$6.11, its best close since June 2001.

Amongst the larger banks, Commonwealth Bank of Australia (ASX:CBA), Australia and New Zealand Banking Group (ASX:ANZ) and National Australia Bank Ltd (ASX:NAB) fell between 0.2 per cent to 0.4 per cent, though Westpac Banking Corp (ASX:WBC) closed higher by 0.2 per cent at AU$33.40. A new report from Fitch Rating said profit growth at Australian banks could be adversely affected due to higher bad debts and a squeeze on profit margins due to the fierce competition in the mortgage market, according to the Sydney Morning Herald.

A report in The Age says that low commodity prices, weak credit growth or tighter regulation would cause lower returns this year at Australian banks and mining companies, quoting the country’s top international fund managers. Overall, global stocks could outperform Australian shares because of the weak economy and plunging Australian dollar, they said. According to Ashley Pittard, global portfolio manager at PM Capital, which has AU$2 billion under management, Australian stocks are in “a mundane and corrective phase” that is "out of sync with world markets."

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