Stocks tick higher as banking strength offsets commodity drag

The local bourse has booked modest gains, as financial sector tailwinds offset China-inspired weakness among the miners.

A pedestrian is reflected in the window of the Australian Securities Exchange (ASX) showing stocks gains during opening trading in Sydney on November 10, 2016. Australian stocks surged 2.85 per cent at the open on the back of a rally in commodities with investors betting US president-elect Donald Trump will pursue business-friendly policies. / AFP PHOTO / PETER PARKS

The local sharemarket posted gains on a fresh tailwind from heavyweight financials and dodged a blow from lower commodity prices amid concerns over China demand.

At the close, the S&P/ASX200 index was 0.5 per cent, or 25.5 points higher at 5720.6 while the broader All Ordinaries index close up 0.4 per cent, or 23.1 points on 5779.

Investors met big bank shares with renewed optimism from the outset of trade, with recent concerns over industry culture and practice making way for a fresh cycle out of the mining sector, according to IG chief market strategist Chris Weston.

“There’s been a repricing of financial markets and a move higher in interest rate expectations in the UK, certainly in the US and our market but to a lesser extent,” said Mr. Weston.

“The iron ore futures price has been coming off and that re-enforced the message that if you want to be in a sector at the moment it’s the financials over the mining stocks.”

CBA closed up 0.5 per cent to $76.69, Westpac added 0.7 per cent to $31.67, ANZ rose 1 per cent to $30.18, while NAB shares finished 1.1 per cent higher on $31.20.

Early weakness in resource stocks paved the way for a mixed session as underlying commodities diverged. BHP shares edged 0.1 per cent higher to $26.28, Rio Tinto lost 0.2 per cent to $66.67, while iron ore pure-play Fortescue shed 2.7 per cent to close at $5.40.

While the share market emerged unscathed, concern over China’s economy remains front of mind for commodity traders globally, according to Fat Prophet’s David Lennnox.

“Expectations the market had on [China] data such as industrial production and August retail sales were higher than the end result,” Mr Lennox said.

“That again raises the spectre of China perhaps heading for a slightly ‘harder soft landing’ than the market was anticipating, and every time we see an adjustment in the resources prices.”

Gold miners followed a downtrend in the underlying commodity as North Korean uncertainty and safe-haven buying eased. Evolution Mining closed down 0.41 per cent to $2.40, Northern Star fell 0.79 per cent to $5.05 while Newcrest fared better, closing up 0.09 per cent at $22.46.

Telstra shares lost 1.1 per cent to $3.61 at the close after it affirmed market estimates and forecast near 30 per cent reduction in full-year dividend.

Elsewhere in the telco sector, Vocus closed up 2.13 per cent to $2.40 as investors took kindly to the news executive director Vaughan Bowen beefed up his stake to 8.9 million shares.

In economic data, ratings agency Moody’s said the proportion of mortgages in arrears rose to 1.62 per cent in May, higher than the same month a year earlier and that it expects a continuation of the trend higher.

The Australian dollar found strength throughout the session ahead of Reserve Bank September board meeting minutes due tomorrow amid a resurgent British pound on scaled-up Bank of England rhetoric.

The local currency was 0.2 per cent, or US0.14 cents higher in late trade at US80.16 cents.