Easing geopolitical tensions, renewed demand for high-yielding assets and a surge in BHP Billiton’s share price extended the Australian sharemarket recovery rally today.
The S&P/ASX 200 index climbed 18 points, or 0.32 per cent, to 5566.5 as miners caught up with the rest of the market after lagging for much of the week.
BHP Billiton led the charge after announcing a demerger of its assets was its preferred option to simplify its business.
Last night, the US S&P 500 index gained 0.4 per cent after Russian President Vladimir Putin said he would do everything in his power to end the conflict in Ukraine, with investors shrugging off Germany’s worse than forecast GDP growth of minus 0.2 per cent and France’s flat growth rate.
Eurozone inflation also showed the world’s biggest economic bloc was slipping closer to deflation after July consumer inflation fell 0.7 per cent for the month, dragging the annual rate down to 0.4 per cent.
The flat total eurozone GDP growth rate has been preceded by six negative quarters then four soft positive results, Westpac economist Elliot Clarke said.
“Underlying this soft aggregate growth trend is a tug-of-war between reform and growth-stifling rigidities; the result will determine the Union’s long-term welfare,” he said.
“All told, the challenges faced by the region (political; social; economic; and legal) are substantial; so, the risks to the outlook are great.”
The Shanghai composite index was up 0.8 per cent at the close of the ASX on speculation the government would support the sagging Chinese economy.
In Tokyo the Nikkei index was marginally lower.
Spot iron ore was unchanged at $US93.20 a tonne yesterday while Dalian iron ore futures were up 0.6 per cent.
Copper fell o.7 per cent to a fresh two-month low of $US6835 a tonne while gold was steady at $US1313 an ounce.
IG markets strategist Evan Lucas said the BHP announcement, while not entirely unexpected, was the catalyst for market activity in the afternoon.
"BHP is the thing to talk about as it has rocketed up in the afternoon on nothing really new in regards to its demerger,” Mr Lucas said.
"It means the market is very much looking forward to seeing BHP streamline itself down into a massive producer."
BHP shares surged 89 cents, or 2.33 per cent, higher to $39.05 by the end of Friday’s trade.
The other major resource stocks Rio Tinto and Fortescue also enjoyed a positive end to the week as Rio rose 24 cents to $65.29 while Fortescue lifted six cents to $4.51.
The banking sector was mostly up as Commonwealth put on 18 cents to $81.20, Westpac gained 14 cents to $34.09 and NAB added nine cents to $34.69.
But ANZ’s $5.2 billion cash profit for the nine months to June 30 was not enough to stop its shares falling 35 cents, or 1.07 per cent, to $32.39 at close.
In other local news, shares in building company James Hardie fell $1.01, or 7.21 per cent, to $12.99 after the company warned its full year earnings were likely to fall short of analyst expectations after suffering an 80 per cent slide in its first quarter profit.
Automotive Holdings Group unveiled its full year results which were in line with expectations, prompting shares to dip two cents to $3.80.
The broader All Ordinaries index was up 16.7 points, or 0.3 per cent, at 5559.6.
The September share price index futures contract was 16 points higher at 5510, with 22,376 contracts traded.
National turnover was 1.78 billion shares worth $5.04 billion.