mining stocks help the asx break a three session jinx friday 1369582015

The Australian stock market on Friday turned a blind eye to overnight losses on Wall Street, and instead ended a three-session run of losses with a nominal gain, contributed chiefly by solid gains in mining stocks. The small rally undid some of the damage suffered by stocks during the carnage on Wednesday and Thursday triggered by the strength in the Australian dollar that dented the profitability of Australian exporters, as well as international investors with exposure to the country’s real estate and share markets. Fresh hopes of an interest rate cut at the RBA’s Tuesday meeting were also supportive for stocks.

In market action, the benchmark index S&P/ASX 200 fell sharply in the opening hour to a low of 5,769.60, before swinging around to touch a high of 5,825.10 by about 3 PM in volatile trading marked by alternating bouts of buying and selling.

Indices and sectors

The benchmark S&P/ASX 200 on Friday rose 24.4 points, or 0.4 per cent, and closed at 5,814.4, while the broader All Ordinaries index was up 25.1 points, or 0.4 per cent, at 5,798.8.

The best gaining sectors were materials (+1.48 per cent), energy (+1.15 per cent), industrials (+0.83 per cent) and financials (+0.33 per cent). The top losing sectors on the day were consumer staples (-0.73 per cent), healthcare (-0.51 per cent), utilities (-0.41 per cent) and consumer discretionary (-0.08 per cent).

Stocks

Mining stocks were in the limelight on Friday and were mainly responsible for the markets close in positive territory. BHP Billiton Limited (ASX:BHP) gained 1.66 per cent to AU$32.50, Rio Tinto Limited (ASX:RIO) was up 1.99 per cent to AU$58.29, and Fortescue Metals Group Limited (ASX:FMG) jumped a solid 9.22 per cent to AU$2.37.

Iron ore miners benefited from investor interest following news that the world’s largest ore producer, Vale SA, would cut its output.

According to a report in ABC, Atlas Iron Limited (ASX:AGO) advised Friday that it had reversed his decision to suspend production at all of its three sites in Pilbara by the end of April, and instead, proposed to continue mining activities at two of those three sites through May. "Atlas expects to be cash flow-positive in May," the company’s ASX statement said. "This is based on target all-in cash costs plus interest and sustaining capital expense."

In energy stocks, Woodside Petroleum Limited (ASX:WPL) jumped 0.57 per cent to AU$35.25, Origin Energy Ltd (ASX:ORG) moved up a sharp 2.35 per cent to AU$13.04, Oil Search Limited (ASX:OSH) rose 1.24 per cent to AU$8.19 and Santos Ltd (ASX:STO) was up 1.08 per cent to AU$8.39.

The four major banks also chalked up decent gains on Friday, a welcome change from the hammering they received at the hands of investors in recent sessions. Commonwealth Bank of Australia (ASX:CBA) was higher by 0.06 per cent at AU$88.92, Westpac Banking Corp (ASX:WBC) rose 0.74 per cent to AU$36.73, Australia and New Zealand Banking Group (ASX:ANZ) was up 0.47 per cent to AU$34.15 and National Australia Bank Ltd. (ASX:NAB) moved up 0.11 per cent to AU$36.81.

However, retailers and markets were the laggards in the market. Wesfarmers Ltd (ASX:WES), the owner of supermarket chain Coles, fell 0.16 per cent to AU$43.64 and Woolworths Limited (ASX:WOW) was down 1.63 per cent to AU$29.00. On the other hand, Caltex Australia Limited (ASX:CTX) moved up a tad to AU$35.46, while Myer Holdings Ltd (ASX:MYR) jumped 2.17 per cent to AU$1.41.

With the exception of M2 Group Ltd (ASX:MTU), which closed lower by 0.36 per cent at AU$10.94, and TPG Telecom Ltd (ASX:TPM) which was down 0.45 per cent to AU$8.90, other telecom stocks ended in the green. Telstra Corporation Ltd (ASX:TLS) rose 0.16 per cent to AU$6.24, iiNet Limited (ASX:IIN) gained 0.80 per cent to AU$10.02, and Singapore Telecommunications Ltd (CHESS)(ASX:SGT) was up 0.24 per cent to AU$4.19.

Qantas Airways Limited (ASX:QAN) was up 0.29 per cent to AU$3.40, though Virgin Australia Holdings Ltd (ASX:VAH) fell nearly 2 per cent to AU$0.500. The latter’s purchase of Tigerair for AU$1.00 has finally borne fruit after the budget carrier clocked a quarterly profit for the first time since 2007, according to ABC. Tigerair made an underlying profit before tax of AU$500,000 in the March 2015 quarter compared to a loss of AU$25 million in March 2014, as it benefited from the cessation of a capacity war between Qantas and Virgin, as well as saving on marketing and accounting costs due to a sharing arrangement with Virgin.

Economic news, currency and insight

According to the ABC, the Australian Industry Group’s Performance of Manufacturing Index (PMI) showed that the manufacturing sector remained in contraction for the fifth consecutive month during April, though the extent of decline eased somewhat. The index for April stood at 48 points, below the 50-point borderline that marks contraction from expansion in manufacturing, impacted chiefly by the decline in construction in the mining industry as well as closures in auto manufacturing. "While there are benefits from strong residential construction activity, low interest rates, and the weaker Australian dollar, these are being outweighed by subdued local business investment in equipment, the ongoing drop in mining construction and the progressive closure of the automotive assembly," said Australian Industry Group chief executive Innes Willox, as quoted by the ABC.

The federal government has cracked down on the illegal purchase of Australian properties. Such investors are required to declare themselves by December, failing which they could incur strict new penalties which include a jail term of three years and fines of up to AU$637,500 for companies, and AU$127,500 for individuals, according to ABC. "I say to foreign investors, you have until the end of the year to declare yourselves," said Treasurer Joe Hockey. "If you do not come to us, we will come to you because eventually we will find those people that have engaged in unlawful acquisition of Australian real estate and we will prosecute you and we will be very hard about it."

Data from the RP Data Core Home Index for April showed that house prices increased in all capital cities except Canberra.

On Wall Street, stocks made a sharp comeback on Friday as investors swooped down on healthcare and technology stocks which had been beaten down in a recent sell-off. Investors were also enthused by April economic data that showed the US economy may be coming out of the weakness seen in the first quarter. "Yesterday people were thinking the market was going to fall off of a cliff, and today we're seeing a lot of institutional buying coming in," said Adam Sarhan, chief executive of Sarhan Capital in New York, as quoted by Reuters. "So, the buy-the-dippers show up and defend the market. That leads me to believe there's more upside." The Dow Jones Industrial Average rose 183.54 points, or 1.03 percent, to 18,024.06, the S&P 500 gained 22.78 points, or 1.09 percent, to 2,108.29 and the Nasdaq Composite added 63.97 points, or 1.29 percent, to 5,005.39.

The Australian dollar has weakened following fresh speculation that an interest-rate hike by the US Federal Reserve during the month of June could not entirely be ruled out. At 07:00 this morning (AEST), the Australian dollar was trading at 78.34 US cents, down from 78.75 US cents on Friday, according to the Business Spectator.

The Australian stock market is likely to open higher today given that the June ASX SPI200 Index (AP) Futures was trading up by 34 points at 5,833.2.