Stocks spike, end 1pc higher

BHP has jumped 5 per cent, as the benchmark hit a more than three-month high.

Market gains are displayed on the Australian Stock Exchange (ASX) trading board in Sydney on Thursday, March 31, 2016. (AAP Image/Mick Tsikas) NO ARCHIVING

The Australian sharemarket has jumped 1 per cent to close at a more than three-month high, as investors followed a strong offshore lead that included a surge in commodity prices and a new nine-month peak for US stocks.

At the 4.15pm (AEST) official market close, the benchmark S&P/ASX200 index was up 51.7 points, or 1.01 per cent, at 5,188.8, the highest level since January 4, while the broader All Ordinaries index gained 49.8 points, or 0.96 per cent, to 5,254.7.

Energy groups led the way as oil prices recovered near levels seen before major oil producers abandoned output freeze talks in Doha over the weekend.

It remains unclear whether the recovery from an initial slide on the Doha development is a sign the crude market has turned the corner, however, as news of stalling Kuwait production lent support to the price on Monday night.

“The price may have been helped somewhat by news of Kuwait’s oil workers striking on Sunday, which has seen their daily production drop by 60 per cent,” IG strategist Angus Nicholson said. “But also sentiment in the market has improved substantially, the International Energy Agency issued a report on April 14 predicting that global oil markets ‘would move close to balance’ in the second half of the year.”

Local producers, after having been hit hard on Monday as crude initially stumbled 6 per cent on the Doha news, saw a sharp reversal in fortunes today. Santos bounced 5.2 per cent to $4.08, Woodside climbed 4 per cent to $26.82 and Origin surged 5.7 per cent to $4.98.

The positive showing from oil and gas majors was part of a broad resources rally after base metals bounded higher overnight.

Nickel, copper and iron ore all advanced by more than 2 per cent during the offshore session, encouraging robust bids for BHP and Rio Tinto during the local trading day.

BHP leapt 5.2 per cent to $19.67, bringing its gains over the past fortnight to 23 per cent.

Meanwhile Rio Tinto rallied 3.9 per cent to $49.29 after trimming its iron ore output target for next year by up to 20 million tonnes. The miner linked the lower target to an issue with the rollout of its driverless trains.

The news could serve to strengthen the iron ore price, which has already rallied sharply this quarter toward $US60 a tonne from recent lows below $US40.

The recovery in ore prices has assisted WA-based giant Fortescue, which closed up 6.8 per cent on Tuesday to $3.32.

The strong showing for the market came despite news a July 2 election had become a near certainty.

The failure of the government to pass a bill setting up a construction industry watchdog primed the nation for a double dissolution election and the recent rebound in Labor’s fortunes has enhanced uncertainty around the result.

At this stage investors appear unperturbed even though the news further reduces the chances of a downward move on rates from the RBA anytime soon.

The Australian dollar is surging based on both the reduced chance of a rate move and the recovery in commodities. It hit a 10-month peak of US77.97c during the local session despite the release of the latest RBA board meeting minutes highlighting concerns around the currency’s strength.

Elsewhere, the big banks were included in the risk-on rally. ANZ jumped 1.5 per cent to $24.06, CBA tacked on 0.7 per cent to $74.70, NAB surged 2.5 per cent to $27.20 and Westpac inched up 0.36 per cent to $30.55.

Telstra rose 1.1 per cent to $5.39, while Qantas extended its retreat, tumbling 4.1 per cent to $3.47. The national carrier had plunged over 10 per cent on Monday on news of capacity cutbacks.