Australian shares gain as commodities and calm kick in

Commodities and stronger trading on international markets helped lift Australian shares on Thursday. Photo: Peter BraigFirmer commodity prices, gains on Wall Street and in Europe and a settling of the Chinese sharemarket combined to push Australian shares higher on Thursday, with energy stocks leading the way.
Shanghai night field

The local market received a positive lead from a 0.7 per cent rise in the Dow Jones, while the continuing rally in iron ore prices and a rebound in the oil price from Tuesday’s lows put investors in a buying mood.

June building approvals data was disappointing but failed to move the market.

Australian shares finished in positive territory for the second consecutive day, with the benchmark ASX 200 Index lifting 0.8 per cent to 5669.5 and the broader All Ordinaries Index 0.8 per cent to 5653.1.

Iron ore advanced for a third day to $55.89 per tonne on Wednesday, a 25 per cent gain from the six-year low of July 8. The 4.6 per cent advance on Wednesday was the biggest increase since July 9.

Meanwhile, oil advanced the most in three weeks in New York after US crude stockpiles unexpectedly dropped as production and imports declined. It retreated slightly in Thursday trade to about $US53.70.

Despite the improvement in iron ore prices, CMC Markets chief market analyst Ric Spooner warned the rally would not last.

“While investors have been relieved to see commodity prices stop falling, optimism is likely to be tempered,” he said.

“The consensus view is that the current rally in spot iron ore is likely to be capped by the reality of forecast increases in the supply surplus. Production from Gina Rinehart’s Roy Hill project, for example, is due to begin later this year and then to ramp up significantly over the next two years.”

Nevertheless, mining stocks enjoyed solid rises. BHP Billiton rose 2.4 per cent to $26.50, Rio Tinto lifted 2.4 per cent to $53.00 and South32 firmed 1.1 per cent to $1.80. Pure play iron ore miner Fortescue Metals Group, which rocketed 7.4 per cent on Wednesday, put on another 0.8 per cent to $1.89.

Among the energy stocks, Woodside added 2.1 per cent to $35.68, Santos surged 4.2 per cent to $7.43 and Beach Energy soared 4.9 per cent to 96.5¢.

The banks all finished stronger. ANZ rose 0.7 per cent to $32.47, Commonwealth Bank was up 0.5 per cent to $87.08, National Australia Bank lifted 1.1 per cent to $34.56 and Westpac gained 1 per cent to $34.74.

China’s sharemarket was flat on Thursday after modest gains in the previous two sessions, further settling sentiment after Monday’s 8.5 per cent drop.

“Commodity prices are the main driver today. The banks are following suit and giving confidence,” Morgans private client adviser Alistair McCorquodale said.

“You’re also seeing sentiment around stability in China . . . if we see settling down of that volatility, it aids sentiment here and flows through to commodity prices. The European situation is also off the headlines.”

Mr McCorquodale said that despite the recent focus on China and Europe, the US market and the Federal Reserve remained the major drivers of Australian shares.

“The headlines are all about China but my view is that we still largely take our leads from what the US is doing. It’s the deepest and most influential market. There’s been very little deviation away from the improvement that we’ve seen in the US economy and that’s been set in train for a while now.”

In other market news, Echo Entertainment slipped 0.6 per cent to $4.94 after announcing it would install an additional 1000 poker machines at its $2 billion Queen’s Wharf casino development as part of a draft agreement under consideration with the Queensland government.

GUD Holdings’ share price rocketed 10.9 per cent to $9.38 after its net profit surged 88 per cent to $33.2 million in the year to June 30.

This was driven by underlying earnings before interest and tax at its Sunbeam division soaring 383 per cent to $7.3 million.

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