Australian shares rallied from a 36 point loss at the open to deliver its biggest one-day gain since July 2017.
The S&P/ASX 200 Index closed 76.9 points, or 1.3 per cent, higher at 5805.1, while the broader All Ordinaries rose 74.1 points, or 1.3 per cent, to 5887.9.
ASX futures were sitting 51 points lower prior to the session but despite falling inside the opening few minutes of trading, the local market rallied throughout the day to record its second consecutive gain of more than 1 per cent.
The major banks led the market higher. Commonwealth Bank lifted 2.3 per cent to $68.16, Westpac closed 2.1 per cent higher at $26.84, ANZ advanced 1.8 per cent to $25.66 and NAB closed at $25.11 after climbing 0.6 per cent.
There was broad strength across the financial sector. Macquarie Group shares rose 2.2 per cent to $115.31, Suncorp Group advanced 1.5 per cent to $13.99, QBE Insurance closed at $11.06, up 1.1 per cent and Insurance Australia Group finished the session 0.7 per cent higher at $7.02.
There was optimism from the big resource stocks as BHP Billiton rose 1.8 per cent to $32.22 and Rio Tinto advanced 2.4 per cent to $76.50.
At Melbourne’s International Mining and Resources Conference on Tuesday, Rio’s chief executive Jean-Sebastien Jacques challenged governments to accept more project risk if they wanted a greater share of wealth from the mining industry.
Beach Energy shares rose 10.3 per cent to $1.76 after Goldman Sachs, JPMorgan, Macquarie and Canaccord Genuity upgraded their recommendations on the stock following a “strong” September quarter.
Emeco Holdings rebounded from eight consecutive lossess. The shares, which have fallen 31.6 per cent since October 17, closed Tuesday up 7.7 per cent to 28¢.
Boral was among the biggest drags on the index after the company warned in a quarterly update that profits were below internal company targets for the first part of the financial year due to wet weather.
Its shares fell 2 per cent to $5.52. James Hardie Industries fell 3 per cent to $18.34.
Precious metal prices fell across the board, pushing local gold miners lower on Tuesday. Newcrest Mining fell 1.5 per cent to $20.80, Northern Star Resources closed 2.8 per cent lower at $8.66 and Evolution Mining slid 2.9 per cent to $3.07.
Macquarie upgraded Beach Energy to neutral following its recent underperformance in relation to its oil and gas peers. The broker said that the company’s first-quarter result beat its expectations, driven by higher production and sales, although it did not some price was lower. Beach Energy is expecting production and earnings to be at the upper end of its 2019 financial year guidance, in-line with market forecasts. Macquarie upgraded its EPS forecasts for the company by 10 per cent in FY19 and 2 per cent in FY20-21 on the back of its production update. It said that currently, the oil and gas producer looked to be trading at fair value but also said it was cautious regarding the potential entrance to the ASX100 in the December index re-balance. Macquarie upgraded its target price on Beach Energy by 5¢ to $1.65, at a 7.1 per cent premium to its Monday close price.
What moved the market
Investors in Brazil have been encouraged by the recent election of conservative candidate Jair Bolsonaro to the country’s presidency. Brazil’s stock market jumped 3 per cent inside the opening hours of trading on Monday with the country’s benchmark Ibovespa index now up 10 per cent since September 20, outperforming most major markets. Bolsonaro’s “market-friendly” manifesto pledges have been welcomed by investors, with the incumbent president supporting privatisation and decentralisation. It remains to be seen just how much of a focus the economy is for Bolsonaro however, with much of his campaign focusing on law and order, and conservative social policies.
Crude oil prices fell on Monday as oversupply fears and a higher US dollar ended a two-day rally in Brent crude. Russian Energy Minister Alexander Novak said on Monday that he saw no reason to reduce oil production, echoing remarks made by Saudi Arabia last week. OPEC and its allies have increased their production levels in order to offset output problems in Venezuela, Iran and Angola. The US dollar also had an impact as reports emerged that the Trump administration was preparing to announce tariffs on all remaining Chinese imports by early December, pushing the greenback higher.
The euro didn’t appear to be too impacted by the announcement that German Chancellor Angel Merkel would step down as leader of the country’s governing Christian Democratic Union party. Merkel intends to stay in office until the end of her term in 2021 however her intention to step down could pose a threat to her chancellorship. “We do not expect political development in Germany to have a material influence on the euro,” said CBA senior currency strategist Elias Haddad. “Instead [the euro] will continue to trade heavy in the near-term because there is unlikely to be enough evidence to support a material upward adjustment to ECB interest rat expectations.”
Dwelling approvals rose during September, reversing a slide during the past few months however the details reveal the rise is unlikely to be sustained. “Dwelling approvals rose 3.3 per cent in September, reversing part of the 13 per cent slide over the previous two months but with the monthly move a touch below the consensus expectations of a 3.8 per cent rise,” said Westpac senior economist Matthew Hassan. “Despite this, the detail was weak. The monthly gain centred on the famously volatile high rise unit segment, which had fallen sharply over the previous two months. The September high rise bounce was also heavily concentrated in Victoria.”