the asx gains nearly one per cent led by energy and mining stocks 904282014

The energy sector drove market gains

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By :  ,  Financial Analyst

Global stocks turned bullish yesterday in the light of the US Fed’s assurance that it would be “patient” with interest rate hikes, and steadying oil prices.

The S&P/ASX 200 Index and the broader All Ordinaries Index each gained 0.9 per cent to 5,210.8 and 5,189.7 points respectively, bolstered chiefly by gains of 3.17 per cent in the energy sector, 2.02 per cent in Information Technology and 1.97 per cent in Materials. Powering the ASX to its best session in two weeks were energy stocks such as Woodside Petroleum Limited (ASX:WPL), which gained 3.10 per cent to AU$36.60, Santos Ltd (ASX:STO), up 5.01 per cent to AU$7.96, and Senex Energy Ltd (ASX:SXY) which surged 9.52 per cent to AU$0.345, as investors were encouraged by what appeared to be a pause in the slide in oil prices.

Overnight, however, oil prices turned soft again due to a comment by Saudi Arabia’s oil minister, Ali al-Naimi that OPEC would continue to protect market share by maintaining output levels, according to The Australian. Worse was to come from Russian President Vladimir Putin, who adopted a defiant posture in a news conference and said the Russian economy could restructure in response to falling oil prices and weather oil as low as $40 per barrel, for as long as two years in a worst case scenario. The suspension of a dock workers’ strike in Nigeria was also another bearish factor. “We continue to see further downside risk for Brent as the oversupply in the global market continues to grow,” Macquarie Bank strategist Vikas Dwivedi said in a note to clients, and quoted by The Australian.

Iron ore prices seemed to stabilise as prices for spot delivery at Tianjin, China, gained 0.1 per cent to US$68 per tonne in the latest offshore trading session, as reported by The Australian. Mining stocks turned bullish led by BC Iron Limited (ASX:BCI), which went up 20.24 per cent to AU$0.505 and was the top gainer on the S&P/ASX200 for the second day running. BHP Billiton Limited (ASX:BHP) was up 1.93 per cent to AU$28.04, Rio Tinto Limited (ASX:RIO) gained 2.53 per cent to AU$54.73 and Fortescue Metals Group Limited (ASX:FMG) ended higher by 6.38 per cent at AU$2.50. However, shares in Atlas Iron Limited (ASX:AGO) slipped 3.33 per cent to close at AU$0.145.

Australian stocks are expected to trade bullishly today given the sharp overnight gains on Wall Street. The DJIA gained 2.43 per cent to close at 17,778.15, and clocked its biggest gain of the year as investors interpreted the Fed’s dovish stance as a “holiday gift.” The S&P 500 rose 48.34 points, or 2.4 percent, to end at 2,061.23. The Nasdaq added 104.08 points, or 2.24 per cent to 4,748.40. "The bottom line is that low oil is a net positive for the consumer," Karyn Cavanaugh, a senior market strategist at Voya Investment Management, according to CBS News. "The consumer drives the U.S. economy, which drives the global economy, so that's good news." The comment echoes a similar one on Wednesday by Fed chair Janet Yellen. At 07:57 today (AEDT), SPI futures were trading higher by 62 points at 5,225.

Australian treasurer Joe Hockey dismissed expectations that the Abbott government would try to raise the goods and services tax next term. “If you increase the GST, you need to compensate middle- and low-income Australians with significant tax cuts,’’ he said. “We haven’t got the financial capacity to do that at the moment. Also, I don’t think it is the right time at all to increase prices for Australians. I think they have got enough pressure on family budgets as it stands.”

“Australia has run out of luck,” said Gerard Minack, one of the world’s leading market strategists, and former global head of developed market strategy for Morgan Stanley, according to ABC. He said there was a 40 per cent chance of a recession in 2015, given the reversal in Australia’s once-in-a-century commodity boom.

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

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