Stocks book third week in the black

High-yield, defensive sectors were shunned on Friday, as the local market pared the week’s earlier gains.

The Australian sharemarket has rounded off an overall positive week in lacklustre style, edging lower on the day as high-yield, defensive sectors were shunned.

At the closing bell, the benchmark S&P/ASX 200 index had weakened 15.6 points, or 0.28 per cent, to 5,467.4, while the broader All Ordinaries index lost 16.3 points, or 0.29 per cent, to 5,548.5.

Over the week, the benchmark gained 0.7 per cent, with energy leading the way as crude prices surged back above $US50 a barrel.

It was a similar story through Friday trade, as energy outperformed and defensive areas such as real estate, utilities and telecommunications noticeably lagged.

The lack of interest in the latter stems from rising bond yields, with the lustre on high-yield stocks through a period of record low rates starting to wane.

CMC Markets chief market analyst Ric Spooner said Australian traders were also in a cautious mood Friday due to the imminent release of crucial US jobs data, due out overnight.

“A moderate miss to the downside in the US jobs data will probably do little to change the outlook for a Fed rate hike this year,” he said.

“However, a good read could put the issue largely beyond doubt. This is an outcome that could fuel the current selling momentum in bonds and gold while driving the US dollar higher.”

Equities are holding steady, however, in spite of volatility in other markets.

“Despite current selling in the bond market, equities appear to have an eye on the longer game,” Mr Spooner said.

“Even if US 10-year bonds were to move back towards 2 per cent and the Australian rate towards 2.3 per cent, this would still represent an ongoing ‘Goldilocks’ scenario for stock markets against a back ground of moderate economic growth and some improvement in commodity prices.”

Crude prices have shrugged off a rising US dollar to push higher as investors focus on improving supply and demand fundamentals.

“The (recent) OPEC deal and the fifth straight week of declines in the EIA crude oil inventories continue to buoy the oil market,” IG market analyst Angus Nicholson said.

“Fears about disruptions from Hurricane Matthew may also be providing some upside.”

In energy, Santos bucked the positive trend to slide 2.5 per cent to $3.90 in the last session of an otherwise strong week, while Origin Energy added 0.5 per cent to $5.62, Oil Search gained 1.1 per cent to $7.51, and Woodside advanced 1.1 per cent to $29.85.

In materials, BHP Billiton lifted 0.8 per cent to $23.30, Rio Tinto dipped 0.4 per cent to $52.00 and Fortescue edged up 0.2 per cent to $4.94.

The gold sector performed miserably in contrast, with Newcrest off 2 per cent and Regis Resources slumping 3.8 per cent as the precious metal extended its recent retreat.

Meanwhile Karoon Gas rocketed 13.6 per cent as it neared a deal to buy into two Brazilian oilfields.

The big four banks ended in the black, but to varying degrees, with Westpac leading the way through a 0.6 per cent gain, ahead of Commonwealth Bank’s 0.3 per cent rise.

ANZ and NAB just crept past the flatline at the close.

Financials are seen benefitting from a higher rate environment, but on the flip side the high dividends they offer become less appealing as bond yields lift.

The apparent end of the hunt for yield is largely affecting telcos, utilities and real estate players the most, with Telstra weakening 1 per cent on Friday, Scentre dipping 2 per cent and Westfield giving back 2.4 per cent.

Elsewhere, Qantas ended steady despite rising oil prices and Estia Health skidded 5.9 per cent as investors continued to punish a profit outlook downgrade.

Meanwhile, the Australian dollar edged down to US75.75c by the end of local trade, although it struck a three-year peak against a floundering pound.