Miners and consumer stocks drive gains on ASX amid China hopes

Welcome to your five-minute recap of the trading day.

The numbers

The Australian sharemarket posted strong gains on Thursday, boosted by cyclical stocks such as retailers and tech companies, while miners powered ahead for a third day on optimism for metals demand after the monetary stimulus package announced by China’s central bank earlier this week.

Sentiment was buoyed further in the afternoon when the Chinese government signalled it’s gearing up for additional measures to bolster the world’s second-largest economy.

The S&P/ASX 200 closed 77.3 points, or 1 per cent, higher at 8203.70, having shaken off a negative lead from Wall Street, with all of its 11 industry sectors advancing bar energy.

The Dow Jones weighed on Wall Street on Wednesday.Credit: AP

The lifters

Mining heavyweight BHP gained 1.6 per cent, Rio Tinto added 2 per cent and Fortescue Metals Group climbed 2.9 per cent after the price of iron ore rose yet again overnight, adding to its previous session’s 6 per cent gain.

Consumer-related stocks also powered ahead, with JB Hi-Fi rising 3 per cent, Harvey Norman climbing adding 1.9 per cent and Wesfarmers gaining 1.5 per cent.

One of the day’s strongest performers was building materials maker Brickworks, which jumped 7.2 per cent even as it said it swung to a $119 million loss in the past financial year, due to writedowns for property revaluations. Underlying profit from its Australian business rose 2 per cent to $102 million thanks to price rises and productivity improvements.

Platinum Asset Management rose 1.8 per cent to $1.14 after knocking back a takeover bid from larger rival Phil King’s Regal Partners, saying that at $1.10 a share it undervalued the company and wasn’t in the best interests of shareholders.

The laggards

After a stronger morning, most of the big banks lost ground again as investors continued to rotate into the mining sector. CBA, the biggest stock on the local bourse, dropped 0.4 per cent, Westpac shed 0.7 per cent, and ANZ slipped 0.1 per cent.

Energy giants Woodside (down 2.7 per cent) and Santos (down 2.6 per cent) declined as oil prices fell 2 per cent overnight. Saudi Arabia was reported to be weighing increasing output, and factions in Libya reached a deal that opens the way to the return of some crude production. Brent dropped below US$72 a barrel for a loss of almost 5 per cent since Tuesday’s close.

Investor focus was also on Star Entertainment Group, which revealed a $1.69 billion loss for the 12 months to June 30 after finally securing a last-ditch loan to keep it solvent. The embattled casino operator’s shares are expected to resume trading on Friday.

The lowdown

It was another strong session for Australia’s mining giants, which rose amid hopes the measures announced by China’s central bank - and those mooted yet to come from its government - will bolster their biggest export market.

Chinese leaders pledged on Thursday to deploy “necessary fiscal spending” to meet this year’s economic growth target of roughly 5 per cent, acknowledging new problems and raising market expectations for fresh stimulus on top of measures announced this week.

The remarks came in an official readout of a monthly meeting of top Communist Party officials, the politburo. The September meeting is not usually a forum for macroeconomic discussions, which suggests growing anxiety over slowing economic growth.

China is considering injecting up to 1 trillion yuan ($210 billion) of capital into its biggest state banks to increase their capacity to support the struggling economy, people familiar with the matter told Bloomberg.

Adam Dawes, a senior investment adviser at Shaw and Partners, noted the gains in mining shares at the same time as shares in banks including CBA and Westpac declined for a third day. It’s a stark turnaround from recent months, where a rally in banks helped drive the ASX higher, while miners have lagged.

“It’s good to see that the resources are starting to move. The financials have been doing all the work for the last three to six months,” Dawes said.

On Wall Street overnight, the S&P 500 slipped 0.2 per cent a day after setting an all-time high for the 41st time this year. The Dow Jones dropped 293 points, or 0.7 per cent, while the Nasdaq composite edged up by less than 0.1 per cent.

The Australian dollar has rebounded to be 0.6 per cent higher at 68.66 US cents at 5.07pm AEST. Iron ore prices continued to climb after China unveiled its stimulus measures. The commodity was 1.8 per cent higher at $US96.40 per metric tonne in Singapore.

Treasury yields ticked higher in the bond market after sinking the prior day on a surprisingly weak update on confidence among US consumers. The worst drop in three years raised worries about the US economy’s strength, but it also raised expectations for the Federal Reserve to deliver another dose of bigger-than-usual relief through a big cut to interest rates at its next meeting.

The next date on the calendar circled for a potentially big market move on Wall Street is next week, when the latest monthly update on the US job market will arrive. Slowing hiring in the world’s largest economy has become the top concern among investors.

The Fed kept its main interest rate at a two-decade high for more than a year in hopes of slowing the US economy enough to stifle inflation. Last week, it swung toward protecting the job market by cutting the federal funds rate by a larger-than-usual half of a percentage point. Critics say it may be moving too late.

with AP, Reuters

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