ASX bounces as commodity price plunge pauses

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Shares rebounded off last week’s losses led by commodity plays, as the oil market steadied and investors pushed back into banks after Westpac reported half-year profit figures.

Helping the overall positive feeling in global markets was Emmanuel Macron’s win in the French election, which filtered through to local investors.

A short-term rebound in iron ore futures prompted a strong opening from resources giants BHP Billiton, Rio Tinto and Fortescue Metals but concerns over an over-supplied market saw them fade throughout the afternoon. 

A relief rally in oil prices helped energy stocks to be best performing sector, with healthcare and information technology stocks following closely behind. A continued sell-off in Telstra pulled the telecommunications sector into the red. 

The benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each closed up 0.5 per cent to 5870.9 points and 5897.8 points, respectively. 

There was solid buying support for the banks following Westpac’s first half of 2017 result. National Australia Bank saw its share price jump the most in 2017, up more than 2 per cent, before closing 1.7 per cent higher. 

Commonwealth Bank and ANZ closed up 0.6 per cent and 0.2 per cent, respectively, while Westpac nudged 0.2 per cent higher after reporting that cash earnings grew by 3 per cent in the half while revenue grew by 2 per cent.

“Overall, the result was slightly weaker than expectations with the margin outcome particularly soft,” said Omkar Joshi, senior analyst at Regal Funds Management. 

Australia’s biggest oil producer, Woodside Petroleum, closed up 1.6 per cent to $32.10 as Brent crude oil traded 1.3 per cent higher to fetch $US49.60 a barrel in late Monday trade.

Media stocks soared higher, led by Network Ten, following plans to relax media ownership rules.

Investors punished retail stocks, with Myer tumbling 9.5 per cent to $1 a share. Credit Suisse slashed its profit forecasts for Myer by as much as 33 per cent and cut its share price target by 43 per cent despite the prospect of corporate activity.

The likes of Super Retail Group, JB Hi-Fi and Harvey Norman all experienced a selloff. 

Stock Watch: Macquarie Group

Investors were watching Macquarie Group shares closely on Monday as the price has been recently climbing towards an all-time high and closer towards $100 a share. Two brokers have taken opposite positions, with UBS downgrading the stock to neutral and Bell Potter upgrading the stock to a buy. UBS has said the bank is “running out of a revenue growth”, while Bell Potter upped its earnings forecast by 5 per cent. The bank on Friday reported some strong full year numbers last week that included a record profit of $2.21 billion, up 7.5 per cent on the year before. The company also announced a full-year dividend up 17 per cent and a second half profit up 11 per cent over the prior half. The stock was off 0.6 per cent on Monday to $94.33 a share.

China trade data

China’s foreign trade growth has slowed, while the country’s trade surplus jumped. Imports grew 18.6 per cent over the year through April, down from the 26.3 per cent pace recorded in the previous month and below expectations of 29.3 per cent growth. Exports rose 14.3 per cent, also a healthy pace but well off the 22.3 per cent delivered in March and also below predictions of 16.8 per cent growth. The trade surplus ballooned to 262.3 billion yuan, from 164.3 billion and ahead of predictions for a 197.2 billion surplus.

Business conditions

A measure of business conditions jumped in April to highs not seen since 2008 with sales and employment all at levels that bode well for a pickup in economic growth in coming months. NAB’s monthly survey of more than 400 firms showed its index of business conditions climbed 2 points to 14 in April, well above the long-run average of 5 points. Encouragingly, the survey’s measure of business confidence, which had been lagging conditions over the past months, jumped to 13 from 6 in March.

Building approvals and jobs data

Building approvals plunged 13.4 per cent in March, widely missing market expectations of a 4 per cent fall. Over the 12 months to March, building approvals were down 19.9 per cent. Approvals for private sector houses fell 4.3 per cent in the month, and the “other dwellings” category, which includes apartment blocks and townhouses, was down 22.5 per cent. Investors shrugged off the strong NAB business survey as well as solid ANZ job ads numbers. Job ads rose 1.4 per cent in April, following a 0.3 per cent gain in March, while annual growth in job ads jumped to 10.1 per cent, from 7.1 per cent, boding well for official employment numbers.

Euro

After Emmanuel Macron won the honour of becoming the next French president, the euro spiked to $US1.1022, its highest level in six months and its first break above $US1.10 since the US presidential election. But the euro quickly retraced its gains, and forex traders are pointing to the result already having been largely priced into markets. The French presidential election concluded on Sunday with the centrist Macron defeating far-right candidate Marine Le Pen, as was widely expected.



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