Australia Stocks gain on upbeat offshore lead; eyes on G20 summit

Headline indices of the Australian share market inclined on Thursday, 29 November 2018, as risk appetite buying underpinned on following the overnight rally on Wall Street on the heels of Federal Reserve Chairman Jerome Powell's remarks that were seen as dovish for interest rates, with shares in the heavyweight mining and financial sectors being notable gainers. In afternoon trade, the benchmark S&P/ASX200 index rose 39.02 points, or 0.68%, to 5,764.10 points, while the broader All Ordinaries index added 41.61 points, or 0.72%, to 5,841.70 points.

In a speech to the Economic Club of New York, Federal Reserve Chairman Jerome Powell said that rates are close to "neutral," the level at which they neither hold back growth nor aid it. That might mean the Fed isn't planning to raise interest rates far above their current levels. Powell also appeared to suggest that the Fed might pause its cycle of interest rate increases next year so the central bank can assess the effects of its actions. That relieved investors who feel the nine-year-old bull market could come to an end if rates rise too fast.

 

Investors are looking ahead to the Group of 20 summit beginning Friday when President Donald Trump and Chinese President Xi Jinping are expected to meet and discuss trade issues. The summit will be watched closely for how relations between both countries develop, in addition to further news surrounding Sino-US trade. China's main goal at the G20 meeting is to get the United States to refrain from raising the tariffs in January. Trump is open to a deal with China but is ready to impose more tariffs if the upcoming talks don't yield progress.

Metals and mining stocks were higher, thanks to higher iron ore and copper prices. BHP climbed 1.6%, South32 gained 1.9%, and Fortescue Metals crose 3.9%. Rio Tinto was 2.5% higher after finally giving the green light to the $3.5 billion Kookaideri mine in WA.

Financial stocks edged up. National Australia Bank, Westpac, Commonwealth Bank and ANZ Banking were up in a range of 0.5% to almost 1%.

Petroleum-linked shares were mostly higher even as crude oil prices edged lower overnight. Benchmark U.S. crude slipped by 2.5% to $50.29 a barrel in New York on Wednesday. Brent crude, the standard for international oil prices, sank 2.4% to $58.76 a barrel in London. Santos is added almost 2%, Oil Search rose more than 1% and Woodside Petroleum was up 0.5%.

In economic news, the Australian Bureau of Statistics said that total new capital expenditure in Australia was down a seasonally adjusted 0.5% on quarter in the third quarter of 2018, coming in at A$29.35 billion, following the 2.5% contraction in the three months prior.

CURRENCY: Australian Dollar, seen as a proxy for China-related trades, rose against greenback and other major currencies on Thursday. The Australian dollar was quoted at $0.7303, up from $0.7233 on Wednesday.

OFFSHORE MARKET NEWS: Wall Street stocks closed higher on Wednesday, after Federal Reserve Chairman Jerome Powell hinted that the Fed might not raise interest rates much further. The Dow Jones Industrial Average jumped 617.70 points, or 2.5%, to 25,366.43. The broad-based S&P 500 index surged 61.62 points, or 2.3%, to 2,743.79, its biggest gain since March 26, while the tech-rich Nasdaq Composite Index rose 208.89 points, or 2.9%, to 7,291.59.

The major European markets turned in a lackluster performance on Wednesday. The French CAC 40 Index closed nearly flat. The German DAX Index and the U.K.'s FTSE 100 Index edged down by 0.1% and 0.2%, respectively.

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