energy and mining stocks drive the asx 200 higher by 0 7 per cent 961582015

The Australian stock market maintained a rising tempo through most of Monday’s trade, though it's trading range was bound through the last two hours of the session. This was the eighth consecutive day of gains in the current rally in Australian shares and gains in mining and energy shares were the highlights of the day, following a sharp turnaround in oil prices. The overall market remained buoyed by hopes for a rate cut, and was pricing in a 69 per cent chance that this would happen later today in the RBA’s meeting at 2:30 PM. As a result, it gave short shrift to the negative cues from the Friday fall on Wall Street and disappointing factory data out of China.

Indices and sectors

The benchmark S&P/ASX 200 ended up by 37 points, or 0.7 per cent, at 5,625.3, while the broader All Ordinaries index rose 34.9 points, or 0.6 per cent, to 5,586.5 points.

The best-performing sectors were utilities (+1.79 per cent) and energy (+1.75 per cent). Information technology (-0.49 per cent) and industrials (-0.24 per cent) were the biggest losing sectors.

Stocks

Oil prices have bounced higher from their recent stupor after data indicated that there was a sharp fall in the deployment of US drilling rigs during the month of January, and on news of militant tensions in Iraq that threatened its oilfields. US crude was up US$1.33 a barrel and closed at US$49.57 a barrel Monday on the Nymex, building on an 8 per cent jump in prices on Friday.

Energy stocks followed crude’s lead and moved up nicely. Santos Ltd (ASX:STO) gained 1.52 per cent to AU$8.00, Woodside Petroleum Ltd (ASX:WPL) was up 1.08 per cent to AU$34.65 and Beach Energy Ltd (ASX:BPT), one of the top gainers on the S&P/ASX 200, rose 5.21 per cent to AU$1.01.

In mining stocks, BHP Billiton Ltd (ASX:BHP) was up 1.16 per cent to AU$29.60, though Rio Tinto Ltd (ASX:RIO) closed a shade lower by 0.16 per cent to AU$57.47. However Atlas Iron Ltd (ASX:AGO) plunged nearly 3 per cent to AU$0.165 and Fortescue Metals Group Ltd (ASX:FMG) lost 2.12 per cent to AU$2.31. Amongst gold miners Evolution Mining was the top gainer in the S&P/ASX 200, surging 11.11 per cent to AU$1.00, while Beadell Resources Ltd (ASX:BDR) was the second best gainer, up sharply by 7.02 per cent to AU$0.305.

Banking stocks continued their upward trend as the financial sector gained 0.68 per cent. Commonwealth Bank of Australia (ASX:CBA) was up 0.39 per cent to AU$89.68, Australia and New Zealand Banking Group (ASX:ANZ) rose 1.12 per cent to AU$33.37 and National Australia Bank Ltd (ASX:NAB) moved up a marginal 0.06 per cent to AU$35.65. However, Westpac Banking Corp (ASX:WBC) was the best gainer among the big four banks, up 1.13 per cent to AU$34.85 amidst reports of a decisive reorganisation of its management structure by new Chief Executive Brian Hartzer.

Clothing retailer Kathmandu Holdings Ltd (ASX:KMD) was the top loser on the S&P/ASX 200, crashing by nearly 28 per cent to AU$1.355 after the company warned that it expected to book a net loss of between NZ$1 million (AU$935,000) and NZ$2 million for the six months ended January 25, citing soft Christmas sales in Australia and weaker gross margins.

Economic news, currency and insight

Even though Chinese factory data released over the weekend was weaker than expected, copper prices ruled firm in the London metal exchange and touched a nearly one week high on Monday at US$5,548 per tonne. This was more of the ‘bad news is good news’ syndrome, as investors took the view that the weak data would lead to more Chinese monetary stimulus and therefore better demand for the red metal.

The Dun & Bradstreet Business Expectations Survey for the second quarter of 2015 found that 30 per cent of firms expected to hire during this quarter while only 7 per cent thought they would reduce staff numbers, according to The Sydney Morning Herald. "The outlook on employment is the most positive for 10 years and follows data from the Australian Bureau of Statistics showing that the unemployment rate fell to 6.1 per cent," the survey said.

However, the business sector turned down its expectations of economic growth, sales and profits following currency volatility, the crash in oil prices and subdued consumer confidence. "The healthy optimism that was recorded for the first quarter of [the] year appears to have dissipated amid uncertainty about near-term economic growth and an unsettled operating environment," said Gareth Jones, Chief Executive of Dun & Bradstreet in Australia and New Zealand, and quoted by The Sydney Morning Herald.

Data from researcher CoreLogic RP Data showed that house prices jumped in January in the three state capitals of Melbourne (+2.7 per cent), Sydney (+1.4 per cent) and Brisbane (+0.6 per cent), but fell in Darwin (-1.3 per cent), Adelaide (-1.2 per cent) and Perth (-0.6 per cent), as reported by The Australian.

“Sydney has shown the best rate of capital gain of any capital city in the years after the GFC,” CoreLogic said. “From January 2009 through January 2015 Sydney home values have increased by 57 per cent,” said CoreLogic head of research Tim Lawless.

The Australian dollar is showing some strength, and has bounced back above the 78 US cents level, according to The Sydney Morning Herald, as markets head into a key RBA meeting today. "The market is really already over its skis," Steven Saywell, London-based global head of foreign-exchange strategy at BNP Paribas. "If they disappoint, you could see the Australian dollar bounce quite significantly. We like long-Aussie," he said. The Aussie was trading at 78.02 US cents at 09:05 this morning (AEDT).