A rise in world oil prices has helped the Australian sharemarket regain some of the ground lost in last week’s Trump-inspired slump, with energy stocks leading solid gains for most sectors.
The benchmark S&P/ASX200 closed 0.8 per cent higher on Monday, with strong gains for oil majors Santos, Woodside, Origin and Oil Search after rumours emerged world oil body OPEC would extend production curbs.
Speculation is growing that OPEC – the Organisation of the Petroleum Exporting Countries – and other producers will decide to hold down production by 1.8 million barrels a day until March, 2018, when the parties meet in Vienna on Thursday.
The rumours pushed prices higher, with Reuters reporting West Texas intermediate crude futures are more than 10 per cent above their May lows.
Perpetual’s head of investment strategy, Matt Sherwood, said the oil speculation had reversed expectations around commodities but there was also an element of rebound in the gains.
“It’s also the fact that the Australian sharemarket has had quite a bit of a sell-off more recently so there’s probably a bit of cash on the sideline and investors are putting that to work, given the situation in the US seems to have calmed down a bit,” Mr Sherwood said, referring to the slump in US stocks last week following media reports the US president had sought to intervene in a federal investigation.
Iron ore futures rose on Monday and the miners responded with BHP up 1.4 per cent to $24.63, Rio Tinto up 3.1 per cent to $65.20 and Fortescue lifting 2.5 per cent to $5.37.
Mr Sherwood said market dynamics pointed to the iron ore lift being short-lived.
“China steel demand this year is going to slip by one to two per cent yet we’ve got record seaborne supply into China, we’ve got record domestic production, and at the same time there’s enough inventory within the country to build the Eiffel Tower 13,000 times,” he said.
“It’s a massive oversupply in the iron ore space.”
Elsewhere on the market, the financials sector stayed positive but fell back during the day as ratings agency Standard & Poors lowered the credit ratings of 23 smaller Australian financial institutions.
ANZ was the only big four bank to close lower, down 11 cents at $28.39, as it announced the federal government’s banks levy would cost $260 million a year, post-tax.
After the close of market, the Commonwealth Bank said it would bear a $220m post-tax annual burden from the levy.
And woes continued for online clothing retailer Surfstitch, which plunged 23.5 per cent to 7.5 cents after an earnings downgrade.
The Australian dollar was slightly higher against its US counterpart on the back of commodity sector strength, trading at 74.42 US cents at 1631 AEST, up from 74.29 US cents on Friday.
ON THE ASX:
* The benchmark S&P/ASX200 rose 43.8 points, or 0.76 per cent, to 5,771.2 points.
* The broader All Ordinaries index rose 42.3 points, or 0.73 per cent, to 5,811.2 points.
* The June SPI200 futures contract was 49 points, or 0.86 per cent, at 5,775 points.
* National turnover was 2.1 billion securities traded worth $5.3 billion.
CURRENCY SNAPSHOT AT 1700 AEST:
One Australian dollar buys:
* 74.45 US cents, from 74.29 on Friday
* 82.92 Japanese yen, from 82.82.65 yen
* 66.61 euro cents, from 66.77 euro cents
* 57.30 British pence, from 57.35 pence
* 107.38 New Zealand cents, from 107.88 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEST was $US1,254.26 per fine ounce, down $US3.66 from $US1,250.60 on Friday.
BOND SNAPSHOT:
* CGS 4.50 per cent April 2020, 1.7264pct, from 1.731pct on Friday.
* CGS 4.75 per cent April 2027, 2.4855pct, from 2.482pct.
Sydney Futures Exchange prices:
* June 2017 3-year bond futures contract at 98.230 (implying a yield of 1.77pct) unchanged from Friday
* June 2017 10-year bond futures contract at 97.48 (2.520pct), from 97.495 (2.505pct) on Friday.
(*Currency closes taken at 1700 AEDT previous local session, bond market closes taken at 1630 AEDT previous local session)