australias asx 200 index gains 0 7 per cent led by bullish overseas cues 1318282015

Australian stocks moved higher Tuesday, led by sharp overnight gains on Wall Street as well as bullishness in the mining sector led by heavyweights BHP Billiton Limited (ASX:BHP) and Rio Tinto Limited (ASX:RIO), and renewed investor interest in the large banks.

However, investors dialled back some of their bullish bets upon release of the RBA’s minutes of its April board meeting, which showed the central bank preferred to await more economic data before deciding on interest-rate cuts. Investor sentiment was also affected by data from ANZ-Roy Morgan Research which showed declining consumer confidence.

"It's showing the continuing conundrum that the Reserve Bank have around the dollar and interest rates," Morgans private client adviser Alistair McCorquodale said, as quoted by The Sydney Morning Herald. "But the banks have held up pretty well and after a little bit of softness over the last couple of days, we've bounced back."

JP Morgan economist Stephen Walters said the central bank was still concerned about the “exuberance” in the Sydney housing market.

Indices and sectors

The benchmark S&P/ASX 200 on Tuesday rose 39.2 points, or 0.7 per cent, and closed at 5,872.3, while the broader All Ordinaries index was up 37.2 points, or 0.6 per cent, at 5,844.

The only losing sector on the day was energy (-0.35 per cent). The top gaining sectors were information technology (+2.17 per cent), materials (+1.86 per cent), consumer discretionary (+0.95 per cent) and utilities (+0.76 per cent).

Stocks

Amongst energy stocks, Woodside Petroleum Limited (ASX:WPL) fell sharply by 1.34 per cent to AU$34.69, Origin Energy Ltd (ASX:ORG) gained 0.56 per cent to AU$12.56, Oil Search Limited (ASX:OSH) dipped 0.12 per cent to AU$8.09 and Santos Ltd (ASX:STO) was lower by 0.76 per cent to AU$7.88.

Miners ruled mixed in yesterday’s trading. Though the big miners were higher, such as BHP Billiton Limited (ASX:BHP), which gained 2.62 per cent to AU$30.60 and Rio Tinto Limited (ASX:RIO), up 1.54 per cent to AU$55.50, Fortescue Metals Group Limited (ASX:FMG), the fourth-largest iron ore miner, fell over 1 per cent to AU$1.87, and BC Iron Limited (ASX:BCI) plunged 5.56 per cent to AU$0.255. According to The Australian, iron ore prices logged their third consecutive day of gains, trading as high as US$50.80 per tonne, and comfortably above the recent decade-long low of US$46.70.

Except Westpac Banking Corp (ASX:WBC), which closed flat at AU$38.79, the other three large banks all scored gains. Commonwealth Bank of Australia (ASX:CBA) was up 0.49 per cent to 91.78, Australia and New Zealand Banking Group (ASX:ANZ) gained 0.34 per cent to AU$35.76 and National Australia Bank Ltd. (ASX:NAB) was up 0.65 per cent to AU$38.58.

In supermarkets, Woolworths Limited (ASX:WOW) moved up 1.11 per cent to AU$28.36 and Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, was up 0.54 per cent to AU$42.74. Caltex Australia Limited (ASX:CTX) gained 0.92 per cent to AU$34.95, but Myer Holdings Ltd (ASX:MYR) lost 1.48 per cent to AU$1.33.

Stocks in the telecom sector were a mixed bag. Telstra Corporation Ltd (ASX:TLS) gained 0.32 per cent to AU$6.19, TPG Telecom Ltd (ASX:TPM) was up 2.37 per cent to AU$9.49, Macquarie Telecom Group Ltd. (ASX:MAQ) fell 2.4 per cent to AU$5.28, and iiNet Limited (ASX:IIN) was down 0.69 per cent to AU$8.66. Meanwhile, Singapore Telecommunications Ltd (CHESS) (ASX:SGT), the owner of Optus, Australia’s #2 telecom company, will be delisting from the ASX, but will continue to list on Singapore stock exchange. The company said its decision was driven by the low volumes, liquidity and market demand, which indicated that institutional investors preferred to trade the company’s share on the Singapore bourse.

In information technology, Computershare Limited (ASX:CPU) put up another strong show, rising 3.42 per cent to AU$12.70.

Economic news, currency and insight

The Reserve Bank of Australia yesterday released its minutes of the April board meeting which showed that further rate cuts were still within the realm of possibility, and that a lower exchange rate was desirable.

On the exchange rate, the minutes said: “Overall, members considered that the current setting of monetary policy was accommodative and providing support to the economy. They also acknowledged that a lower exchange rate would help achieve more balanced growth in the economy. Further depreciation of the Australian dollar was likely given the recent declines in key commodity prices.”

On interest rate cuts, the minutes said: “Members also saw advantages in receiving more data, including on inflation, to assess whether or not the economy was on the previously forecast path and allowing more time for the economy to respond to the reduction in the cash rate earlier in the year…Taking all these factors into account, the Board judged that it was appropriate to hold interest rates steady for the time being, while accepting that further easing of policy may be appropriate over the period ahead to foster sustainable growth in demand and inflation consistent with the target.”

The latest ANZ-Roy Morgan Research (RMR) consumer confidence index for the week ended April 19 was down to an eight-month low, falling by 1.0 points to 108.8, and ruling well below the long-term average of 113, according to MacroBusiness. Consumers’ perceptions about the economic outlook over the next year, and next five years, both deteriorated, driving the slump in the index. Consumers also viewed with trepidation the upcoming Commonwealth Budget. However, a 2 per cent bounce in households expectations of their finances next year, helped offset the aforesaid negativity.

ANZ chief economist Warren Hogan commented: “Consumers’ sensitivity to budget news is not surprising. Rather, it fits with the theme of the ‘fragile’ consumer we have seen over the last year or so, with confidence falling in response to any bad news around the economy or budget. This suggests that negative headlines around the worsening budget position could continue to have an impact on confidence, even if the Government delivers a ‘dull’ budget as expected with few major policy measures.”

On Wall Street, stocks put up a mixed show in overnight trading. Unimpressive earnings drove the Dow Jones index to a lower close, while news of a likely mega-merger between Israeli drugmaker Teva and Mylan pushed the NASDAQ higher. The Dow Jones Industrial Average fell 85.34 points, or 0.47 percent, to end at 17,949.59. The S&P 500 lost 3.11 points, or 0.15 percent, to 2,097.29 and the Nasdaq Composite added 19.50 points, or 0.39 percent, to 5,014.10.

Overnight, the Australian dollar recouped some of the damage it incurred after the negative ‘jawboning’ by RBA Governor Glenn Stevens in New York, as well as the fallout from the minutes of the RBA’s last meeting, which showed that interest rates were still on the cards. At 07:00 this morning (AEST), the local currency was trading at 77.06 US cents, up from 76.95 US cents on Tuesday, according to the Business Spectator.

The Australian stock market is likely to open lower today given that at 06:45 this morning (AEST) the June ASX SPI200 Index (AP) Futures was trading down by 21 points at 5,856.0.