Stocks perk up amid light trade

The ASX has closed solidly higher, buoyed by weekend data out of China and a strong Wall Street lead amid tepid trade.

A pedestrian is reflected in the window of the Australian Securities Exchange. (AFP PHOTO/PETER PARKS)

The local sharemarket closed higher after a positive US lead and as weekend manufacturing data out of China beat analyst expectations, rising its highest rate in over five-and-a-half years.

The benchmark S&P/ASX200 closed up 47.7 points, or 0.84 per cent, at 5,729.3 points, while the broader All Ordinaries index rose 46.4 points, or 0.81 per cent, to 5,791.3 points.

Trading volume remained light throughout the session and closed 40 per cent below its 20-day running average, with a little over $3bn in equities changing hands.

The light trading was due to the public holiday, IG chief market strategist Chris Weston said. But he said that investors who were trading, seemed to have a bullish outlook.

“It’s a bit hard to say why everyone’s decided to start the new quarter on a strong footing,” Mr Weston said.

“For some reason, people have decided to bid up banks in a big way, and materials stocks.” Mr Weston said materials stocks rallied because the Chinese economic data was very strong.

“I think what we’re seeing here today is further signs that the global economy is healing nicely,” he said.

“Financials and materials are absolutely firing on all cylinders today, and it’s not difficult in that environment for our market to rally.”

Miners drove the market higher off the back of positive China data and despite lower iron ore prices.

“China’s September PMI hit the highest level since May 2012. The new orders index was the key driver and the price index increased, indicating that September’s PPI will rise once again,” said ANZ economist Daniel Gradwell.

“This was the first time new orders beat output this year, suggesting a potential ‘excess demand’ to some extent.”

But Morgans retail Asian desk head Raymond Chan said he expects some tightening in steel production ahead of the China National Communist Party Congress meeting in mid-October to clean out the air.

“Steel production will be depressed over the next few weeks and that will further hurt the iron ore price,” he said.

Iron ore slipped 1.9 per cent to $US61.50 during the last session, down from $US78 in August.

Commonwealth Bank ended the session 1.45 per cent higher at $76.34, after announcing long-serving CEO of its wholly-owned New Zealand lender ASB Bank would resign.

Barbara Chapman, who has headed up the bank since 2011, is the latest senior executive set to quit CBA in recent months following a string of scandal allegations.

Westpac was up 1.07 per cent at the close to $32.26 and ANZ was up 1.01 per cent to $29.90. NAB rose 0.73 per cent to $31.73.

In resources, BHP was 1.32 per cent higher to $26.12 at the close. Rio Tinto was up 2.21 per cent to $68.00 and Fortescue climbed 1.75 per cent to $5.23.

Beach Energy gained 12.10 per cent, closing at $0.91, following the successful completion of its $201m institutional portion of its rights share issue to fund its $1.585 billion acquisition of Lattice Energy. The company hopes to raise another $100m when the retail portion of the rights offer opens on October 5.

Oil Search rose 1.43 per cent to $7.10 and Origin Energy dropped 1.07 per cent, closing at $7.40. Woodside Petroleum was up 0.69 per cent to $29.30 at the close and Santos gained 0.75 per cent, closing at $4.05.

Elsewhere, a2 Milk surged 5.29 per cent to $6.17. It follows losses late last week after a2 partner Synlait announced it had received registration for a2’s infant formula from Chinese authorities. The announcement will allow the company to continue to export its infant formula to China in 2018 when China tightens its rules. Synlait closed 0.16 per cent higher at $6.16.

The market is pricing in at a near certain hold on the October cash rate when the Reserve Bank delivers its verdict on Tuesday.

“The RBA will almost certainly remain on hold, the post meeting statement narrative again likely to reflect still improving labour market reports and to note the modest pullback in the AUD,” NAB director of economics David De Garis.

The Australian dollar was 0.2 per cent lower at US78.18 cents in late trade.

with AAP