Major banks lead ASX advance
Australian shares finished higher on Monday, led by positive performances from the banks.
The market had been expected to drop amid the fallout from the banking royal commission but instead, the S&P/ASX 200 Index finished up 17.2 points, or 0.3 per cent, to 5886.
ANZ shares were up 0.9 per cent despite revelations at the royal commission on Monday that its financial advice was not in the interest of customers and that "high risk" advisers were instructing clients. It finished the day at $26.97.
Commonwealth Bank and Westpac did not face the royal commission on Monday but both recorded gains of 0.9 per cent. NAB closed the day up 1.4 per cent at $28.76.
Bendigo & Adelaide Bank gained 4.9 per cent to give the company its biggest full-day gain since August 2014, following a ratings upgrade from Goldman. Its share price closed at $10.40.
Softening commodity prices didn't have a major impact on the market as BHP, Rio Tinto and Newcrest Mining all led the market higher.
BHP Billiton shares hit a two-month high after a Brazilian court postponed the deadline to reveal the compensation plan for victims of the 2015 Samarco mine disaster which killed 19 people, by 66 days. The Samarco iron ore mine is a joint venture between BHP and Vale. BHP closed up 1.2 per cent to $31.23.
Newcrest Mining shares jumped after the company announced it would be able to return to full production after its Cadia Hill open pit was approved for tailings disposal. Production has been reduced since the collapse of tailings dam at the site in early March. Newcrest shares were up 2.8 per cent to $20.55.
Former House of Fraser chief executive John King was revealed as the new chief executive of Myer on Monday, helping the embattled department store chain climb 8.5 per cent to 38.5¢.
iSelect shares plummeted on Monday following an earnings downgrade of more than 69 per cent. The stock dropped from $1 to 38.5¢ at its lowest, before recovering the finish the day down 55.5 per cent at 44.5¢.
Australian Pharmaceutical Industries was the worst performer on the market, trading down 6.3 per cent at $1.33 after Credit Suisse decreased the company's price target, maintaining its "neutral" rating.
Stock watch
Challenger
Macquarie has upgraded its recommendation for Challenger from "neutral" to "outperform" on the back of the company's third-quarter assets under management, net flows and sales update. The update showed Life net book growth of 5.2 per cent in the half was offset by Total Life sales which were down 13 per cent vs pcp. "While we recognise the gross sales number was below expectations it appears this was by design and ultimately net book growth drives earnings," the broker said. Macquarie said a declining annuity maturity rate will help to sustain net book growth rates and that near-term credit quality metrics holding up contributed to the "outperform" recommendation. Macquarie gave the company's price target a slight increase from $12.95 to $13.
What moved the market
Chart - Outperforming small caps
Small cap stocks have been making up ground after underperforming for half a decade following the bounce from the financial crisis according to research by Citi. The research did say that the faltering of larger caps had contributed to the closing of the gap as conditions in banking, insurance, food retailing and telecommunications become tougher. Citi said they believed the growth of small caps had been driver by better earning growth which analysts believe will continue. Strengthened business conditions in Australia could also be contributing as it coincides with the small and mid-cap outperformance.
Currency - AUD
The Australian dollar was trading at US76.76¢ at market close on Monday after it hit a low of US76.55¢ on Friday. The dollar has hovered around multi-week lows after the currency slipped 1.3 per cent last week, recording its biggest weekly fall since mid-March. Investors are looking ahead to Tuesday's Australian Consumer Price Index data for the first quarter to determine whether the currency will continue to decline. The annual Consumer Price Index rate is expected have increased to 2 per cent, inside the RBA's 2-3 per cent target band. Traders say that if inflation figures miss forecasts, the dollar could fall below US76.50¢, its lowest price since December last year.
Commodity - Nickel
Nickel has moved lower over the weekend as fears that Washington would impose further sanctions on Russia softened. Sanctions against oligarch Oleg Deripaska were expected to be expanded to Norilsk Nickel where Deripaska is a shareholder but the market is indicating that this now seems unlikely. Market watchers believe Norilsk could be protected from sanctions because it is the number one producer of palladium for automotive manufacturers. North American and Latin American customers accounted for 34 per cent of Norilsk's palladium sales in 2016 and sanctions against the miner could cause collateral damage, hurting the US auto industry.
AMP
AMP shares fell 3 per cent on Monday following another day fronting the royal commission. AMP faced the royal commission, responding to claims that a financial planner gave inappropriate advice to a young couple with a one-year old daughter. The financial planner, Ms Jennifer Coleman, was allowed to continue giving advice despite multiple failed audits. AMP recorded its seventh consecutive session of losses on Monday and could record further losses as law firm Quinn Emanuel Urquhart and Sullivan decides whether to launch a class action against the financial services giant. AMP shares shed more than $1 billion in last week's trade and have fallen more than 20 per cent since March 8.