Australia Market extends gain on Wall Street's rally, US-Mexico deal

Headline indices of the Australia stock market advanced on Tuesday, 28 August 2018, on tracking the fresh record closing highs on Wall Street overnight after the U.S. and Mexico announced a new trade agreement. Total 7 out of 10 ASX issues inclined, with shares of financials, realty, materials, industrials, healthcare, and information technology issues were notable gainers. In late afternoon trade, the benchmark S&P/ASX 200 Index added 43.63 points, or 0.278%, to 6,312.50. The broader All Ordinaries Index rose 39.94 points, or 0.63%, to 6,421.

On Monday, the United States and Mexico announced that a deal had been agreed upon after months of negotiations between the two countries over the future of the North American Free Trade Agreement. US President Donald Trump and outgoing Mexican President Enrique Pena Nieto hailed the new trade agreement, which raises hopes the North American Free Trade Agreement can be salvaged after Canada rejoins the talks on Tuesday. The new deal includes provisions on auto trade, tougher worker protections, which President Donald Trump has said would be called The United States-Mexico Trade Agreement, is expected to last 16 years and will be reviewed every six years pending its approval by Congress.

 

Shares of materials and resources inclined, buoyed by gains in commodity prices thanks to a softer greenback. Top miners BHP Billiton was rising 0.6%, Rio Tinto rose almost 1% and Fortescue Metals advanced more than 1%.

Financial stocks were the biggest winners with the 'Big Four' banks leading the way, even as a damning Royal Commission inquiry into the sector continues. The big four banks - Westpac, Commonwealth Bank, National Australia Bank and ANZ Banking - were higher in a range of 1.1% to 1.3%.

Energy stocks mostly gained after crude oil prices edged higher overnight. WTI crude futures added $0.15 to close at $68.87 a barrel on the New York Mercantile Exchange. In the energy space, Woodside Petroleum added almost 1% and Oil Search 0.3%, while Santos declined0.7%.

Shares of telecom companies were the main drag on the market with losses for Telstra (TLS) and Vocus (VOC) both declined more than 1% while Hutchison Telecom (HTA) was down 10% following a sharp increase in the stock price last week on proposed merger talks for Vodafone Australia (50% owned by HTA) and TPG Telecom.

Among individual stocks, Caltex Australia shares dropped as much 7% after oil refiner's reported a 1% increase in half-year underlying profit, reflecting margins that were hurt by higher crude prices and corporate costs.

Blackmores (BKL) has jumped 10% on a strong FY18 result. The vitamin maker saw net profit lift 19% to $70 million with revenue improving by 9% to A$601.1 million on strong sales in China and the Asian region. BKL has also acquired the weight loss IMPROMY brand for A$9 million.

Specialty Fashion Group's shares rose more than 7% after the company reported a full-year loss that narrowed from last year and reiterated its plan to start paying dividends again over the coming year.

CURRENCY NEWS: The Australian dollar was higher against the U.S. dollar on Tuesday, with news of a preliminary trade agreement between Mexico & the US as a replacement for the North American Free Trade Agreement (NAFTA) buoying investor sentiment. The Australian dollar was quoted at US$0.7347, up from US$0.7313 on Monday.

OFFSHORE MARKET NEWS, US stock market climbed to fresh all-time highs on Monday, as the Trump administration sealed a bilateral trade deal with Mexico. The Dow Jones Industrial Average jumped 259.29 points or 1% to 26,049.64, the Nasdaq advanced 71.92 points or 0.9% to 8,017.90 and the S&P 500 climbed 22.05 points or 0.8% to 2,896.74.

The major European stock markets ended higher on Monday. The German DAX Index jumped by 1.2% and the French CAC 40 Index climbed by 0.9%, while the U.K. markets were closed for a holiday.

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