Australian shares rebounded from a 21-month low and ended a four-day losing streak on Thursday, as lithium miners and major banks led the market higher.

The S&P/ASX 200 Index rose 48.5 points, or 0.9 per cent, to 5691.3 while the broader All Ordinaries advanced 48.2 points, or 0.8 per cent, to 5700.3.

“With the 200 Index retesting 5,600 support last seen in late October, buyers have entered the market on a valuation basis with the banks leading the way,” said City Index market analyst Gary Burton.

ANZ led the gains for the big four, lifting 1.3 per cent to $25.75. NAB rose 0.9 per cent to $24.23 and Commonwealth Bank edged 0.8 per cent higher to $70.63. Westpac rallied from a loss earlier in the day as chief executive Brian Hartzer faced the banking royal commission. Its shares closed 0.4 per cent higher at $25.68. 

Lithium miner Mineral Resources was among the best performers on the market on Thursday after the company agreed to sell a half share in its Wodgina lithium project to battery metals giant Albemarle in a deal worth $US1.15 billion ($1.58 billion). The company is expected to push ahead with plans to build a lithium hydroxide plant at the mine. Its shares rose 26.6 per cent to $15.76. 

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Fellow lithium miners Galaxy Resources and Pilbara Minerals also saw their share prices rise. Galaxy closed trading 9.2 per cent higher at $2.72 and Pilbara rose 7.6 per cent to 85¢. 

Chinese focused consumer stocks were among the best performers on the market on Thursday after Chinese authorities agreed to delay the implementation of tough e-commerce regulations that had threatened sales into the country. A2 Milk shares rose 5.9 per cent to $9.90, Bellamy’s Australia advanced 4.7 per cent to $7.55, Blackmores climbed 5.9 per cent to $133.40 and Treasury Wine Estates closed at $14.29, up 5.7 per cent.

Primary Health Care shares closed trade 8 per cent higher at $2.56 after the company reiterated its underlying 2019 profit guidance. While chief executive Malcolm Parmenter said the first quarter had been softer on the back of a mild flu season, profits were still expected to be at or above $100 million. 

Wesfarmers shares were slightly weaker on Thursday, falling 2 per cent to $31.32just a day after Coles was officially spun-off. The newly listed supermarket closed Thursday flat at $12.75, despite Goldman Sachs analyst Andrew McLennan initiating coverage on the company with a “buy” recommendation.

ASX-listed RCR Tomlinson announced it had gone into administration after being unable to secure additional funds from banks. Its shares have not traded since November 9. 

Stock watch

A2 Milk

Credit Suisse said A2 Milk has enjoyed a solid start to the year with revenue for the first four months to October rising 40.5 per cent. The broker said the performance had been driven by a steady Australia and New Zealand market share as well as progress in the China infant formula market. “The quality of observable market data remains patchy, however, we regard this performance and outlook consistent with our financial year expectations,” said research analyst Tristan Joll, adding that its forecasts may yet prove conservative given the strong year-to-date momentum. “In our view, A2 Milk’s execution continues to impress and although risks remain, the most topical of these (China regulation) appears decreasingly likely to force abrupt changes to the business model as Jan-1 approaches.”

What moved the market

Oil stockpiles

Oil prices rose higher on Wednesday, rebounding from their lowest level this year despite strong production in the United States. While US refined oil products declined last week, upstream there was a larger than expected increase in US oil stockpiles. Oil inventories lifted 4.85 million barrels last week, coming in well ahead of a forecast 2.86 million barrel increase. Surging US oil production has been one of the key reasons oil prices have softened in the past few weeks, helped by Russia’s reluctance to cut production and the US allowing Iran to continue to export its oil to certain countries for up to 180 days.

Copper

Copper prices edged higher on Wednesday on the back of renewed optimism across equity markets. A lower US dollar helped the base metal, which ended 0.8 per cent higher on the London Metal Exchange at $US6,235 a tonne, although other metals on the exchange were more mixed. The metal was still $US60 shy of the two week high it hit on Tuesday. Concerns about the US-China trade dispute and demand growth in China is likely to cap copper’s gains in the near-term. The price is still well below levels seen through the middle of June and is sitting in the lower third of its 52 week range. 

Euro

The euro traded with some volatility overnight as news came to light the European Commission rejected Italy’s 2019 draft budget proposal. In a damning report on Italy’s budget plans for next year, the Commission suggested Italy should face disciplinary action after “serious non-compliance” with European Union fiscal rules.Italy’s debt is currently around 131 per cent to GDP. While the previous Italian government had promised to keep its budget deficit to 0.8 per cent of GDP but the new Italian government’s budget envisioned it at 2.4 per cent. The euro is currently trading close to its 52-week low.

Coles

Macquarie commenced its coverage of Coles with a ‘neutral’ recommendation, saying that its enviable market position and the broad macro drivers supporting demand would make the company very attractive to defensive investors. The broker did flag the changing Australian supermarket environment as a potential risk going forward, with Coles’ 31 per cent market share likely to come under pressure as German hypermarket chain Kaufland expands into Australia. The broker gave the company a price target of $13.48 based on a Sum of Parts methodology, at a 5.7 per cent premium to its opening day closing price. 

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