Australia Stocks surge in relief rally after China-US deal

Headline indices of the Australian share market advanced on Monday, 03 December 2018, as appetite for riskier assets underpinned after Donald Trump and Xi Jinping agreed to a temporary truce (90 days) in the US-China trade. All ASX issues inclined, with shares in energy, materials, technology, healthcare, and financial, realty, and consumer staples issues being notable gainers. At closing bell, the benchmark S&P/ASX200 index advanced 104.04 points, or 1.84%, to 5,771.20 points, while the broader All Ordinaries index surged 106.99 points, or 1.86%, to 5,856.30 points.

Risk appetite has returned this morning on the positive Sino-US trade truce struck at the G20 Summit, a relief for the global economic outlook and a tonic for emerging markets. In a much-anticipated meeting between Donald Trump and Xi Jinping at the weekend, the heads of the world's two biggest economies hammered out a deal that will see them hold off on their tit-for-tat tariffs row, which has roiled global equities for most of the year. The leaders called a cease-fire in their trade dispute, to last for at least 90 days, to allow time to smooth out disagreements over Chinese technology policies that the U.S. and other trading partners consider predatory. Trump will hold off on plans to raise tariffs on $200 billion in Chinese goods, which were supposed to kick in on Jan. 1. In return, Xi agreed to buy a "very substantial amount" of agricultural, energy and industrial products from the U.S. to reduce its large trade deficit with China.

Shares of energy and material issues were top performer in the benchmark. Santos continued to lead the gains for energy stocks, up more than 5% after announcing gas from its third and final Bayu Undan well, with the project to deliver under budget and ahead of schedule. Origin Energy rose 3.1% and Oil Search rose 3.2%. Among materials, shares of sector giants BHP and Rio extended earlier gains, rising 2.8 and 2.3% respectively, while Fortescue Metals was up 4.5%. South32 rose more than 5% after commencing bedrock testing at its Balladonia nickel project in Western Australia, while BlueScope Steel surged more than 9% higher on launching a new A$250 million buyback after it projected a 10% increase in first-half underlying EBIT compared to the preceding half year.

Shares of banks and financial stocks were also higher. Westpac, Commonwealth Bank and ANZ Banking were higher in a range of 0.2% to 0.8%, while National Australia Bank is down 0.2%.

Among individual stocks, GrainCorp's shares are gaining almost 27% after the grain handler received an all-cash A$2.38 billion buyout offer from asset manager Long-Term Asset Partners.

ECONOMIC NEWS: 1) Australia's total number of building approvals slid a seasonally adjusted 1.5% on month in October, the Australian Bureau of Statistics said on Monday, standing at 17,070 following the 3.3% increase in September. On a yearly basis, approvals tumbled 13.4%, after sliding 14.1% in the previous month.

2) The Australian Industry Group Australian Performance of Manufacturing Index (Australian PMI) slumped 7.0 points to 51.3 in November, indicating slower growth in the manufacturing sector. This is the lowest result since October 2017 but still extends the index's period of uninterrupted growth to 26 months.

CURRENCY: Australian Dollar, seen as a proxy for China-related trades, was up against greenback on Monday on trade optimism after U.S. President Donald Trump and his Chinese counterpart Xi Jinping have agreed to a 90-day truce in the escalating trade war between the two countries. The Australian dollar was quoted at 73.51 US cents, up from 73.15 US cents on Friday.

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