australian stocks soar over 1 per cent to clock their tenth winning session 970892015

The Australian share market scored its tenth straight winning day on Wednesday as higher commodity prices attracted investors to mining and energy stocks, and bullish sentiment spilled over from the previous day’s rate cut. An upward trend in global equity markets as well as receding fears of a Greece-led eurozone crisis also supported the rally in local stocks, which ended over one per cent higher.

However, the market could not maintain its best levels of the session which was reached in the first hour of trade due to tired bull liquidation and profit-taking in banks, energy stocks and blue chips such as Telstra Corporation Ltd (ASX:TLS).

Indices and sectors

The benchmark S&P/ASX 200 ended up by 69.9 points, or 1.2 per cent, at 5,777.3, while the broader All Ordinaries index rose 67.5 points, or 1.2 per cent, to 5,733.7.

The best-performing sectors were materials (+3.23 per cent), energy (+1.54 per cent), and utilities (+1.46 per cent). The losing sectors were telecommunications (-0.98 per cent), consumer discretionary (-0.28 per cent) and information technology (-0.10 per cent).

Stocks

Energy stocks continued to be in the limelight following the rebound in oil prices, though they closed off the best levels of the day on growing perception that the rally may not last. Santos Ltd (ASX:STO) was up 1.83 per cent to AU$8.36, Woodside Petroleum Ltd (ASX:WPL) gained 0.50 per cent to AU$35.87, and Oil Search Ltd (ASX:OSH) jumped 1.68 per cent to AU$8.47. Senex Energy Ltd (ASX:SXY), the third biggest gainer on the S&P/ASX 200, surged 15.38 per cent to AU$0.375. Rising oil prices, however, are negative for airlines, and investors sold off Qantas Airways Ltd (ASX:QAN), which fell 1.24 per cent to AU$2.38.

Stocks in materials, the best performing sector, however, managed to hold onto their initial gains and closed at or near their best levels of the day. BHP Billiton Ltd (ASX:BHP) was up a solid 4.37 per cent to AU$31.99, Rio Tinto Ltd (ASX:RIO) gained 3.67 per cent to AU$35.87, and Fortescue Metals Group Ltd (ASX:FMG) surged nearly 9 per cent to AU$2.58. Iron ore miner Atlas Iron Ltd (ASX:AGO), the top gainer on the S&P/ASX 200, vaulted nearly 28 per cent to AU$0.21 as investors savoured the favourable impact from rising iron ore prices, lower interest rates and a weaker Australian dollar. Iron ore prices gained 1.2 per cent in overnight trade to US$63.18, according to The Sydney Morning Herald.

Banks continued their winning run and Westpac Banking Corp (ASX:WBC) jumped 2.75 per cent to AU$36.23, Australia and New Zealand Banking Group (ASX:ANZ) shot up 1.50 per cent to AU$34.62, National Australia Bank Ltd (ASX:NAB) was up 0.75 per cent to AU$36.50 and Commonwealth Bank of Australia (ASX:CBA) gained just 0.43 per cent to AU$90.79.

The upbeat sentiment extended to retailers. Woolworths Ltd (ASX:WOW) rose 1.55 per cent to AU$32.79, and Wesfarmers Ltd (ASX:WES), which owns the Coles supermarket chain, was up 0.82 per cent to AU$44.53. Westfield Corp Ltd (ASX:WFD) slipped 1.47 per cent to AU$10.08 on news that the shopping centre operator sold a 47.4 per cent stake in three US shopping malls to O’Connor Capital Partners.

Telstra Corporation Ltd (ASX:TLS) fell 1.05 per cent to AU$6.60.

Downer EDI Ltd (ASX:DOW) shot up 5.15 per cent to AU$4.49 on news that the company had won a AU$1 billion, 10-year contract to provide maintenance services to trains in Asciano's Pacific National rail group. The services include maintenance for more than 300 locomotives, a 24-hour fleet control centre and remote train monitoring, according to The Sydney Morning Herald.

Economic news, currency and insight

The torrid, 10-day winning streak on the ASX has added about AU$145 billion to market capitalisation, and therefore shareholders’ wealth, according to an estimate by The Sydney Morning Herald.

Westpac Banking Corp (ASX:WBC) and Commonwealth Bank of Australia (ASX:CBA), two of the largest banks in Australia, have passed on the RBA’s rate cut to their home loan customers by way of reduced interest rates, according to The Sydney Morning Herald. Westpac cut its standard variable rate by 0.28 per cent, while Commonwealth cut that rate by 0.25 per cent.

Property forecaster BIS Shrapnel raised its forecast for housing and apartment starts, saying the RBA’s rate cut would accelerate the already biggest building boom in the country’s history, according to the Australian Financial Review. “We were saying something in the low-mid 190,000s,” said BIS Shrapnel’s associate director Kim Hawtrey, and referring to the number of dwellings likely to be built this year. “Now we’d be saying something in the upper 190,000-level.” That would beat the previous record of 187,000 in 1994.

Mortgage industry experts however allayed fears that the interest rate cut could further fire up already high property prices, particularly in a market such as Sydney, saying there was sufficient regulatory vigilance on mortgage lenders to prevent the occurrence of a housing bubble, according to The Australian. “As to if they (APRA) do more, well I think they’re already doing what’s required which is to stay very vigilant and if they see a trend that concerns them then they’ll act, but I don’t think there’s any need for them to act other than what they’re doing,” said Jamie McPhee, chief of ME Bank, referring to the Australian Prudential Regulation Authority (APRA)’s ongoing review of bank lending practices.

According to the National Australia Bank Quarterly Business Survey, business confidence slipped from 6 to 2 during the December quarter, falling below the long-term average level. Another survey, the Commonwealth Bank of Australia Future Business Index, also showed that business confidence fell 1 per cent to 8.2 per cent in the same period. The two readings show that the RBA’s recent rate cut was a timely action, said The Sydney Morning Herald.

The Australian dollar received a fillip from the move yesterday by the People’s Bank of China to cut the Reserve Requirement Ratio by 50 basis points to 19.5 per cent, reaching a high of 78.46 US cents before correcting to a low of 77.42 US cents in overnight trade. At 08:46 this morning (AEDT) the local currency was trading at 77.60 US cents.