ASX advances as budget day looms
The Australian market has begun the week with an advance, recording its sixth gain in seven sessions, although gains were relatively muted as traders wait for the budget.
The S&P/ASX 200 Index closed the day up 21 points, at 6084, a gain of 0.4 per cent, with BHP Billiton, Westpac and Macquarie some of the standouts of Monday's trading session.
"It's a document that usually doesn't impact markets that much but it is likely to reflect a positive backdrop for the economy and the government's finances," said Greg McKenna, chief market strategist at AxiTrader.
BHP Billiton shares rose above $32 in early trading on the back of rising oil prices, reaching its highest level since March 2014. The stock finished the day at $31.95, up 1.5 per cent.
Wider profit margins and lower charges for bad debt helped Westpac notch a first-half cash profit of $4.25 billion, an increase of 6 per cent. Its shares rose 0.8 per cent, finishing the day at $29.34.
Macquarie rose on predictions that it would deliver another record profit in 2019 after the bank reported a record full-year profit on Friday. Its shares up were 1.9 per cent at $110.09 on Monday.
Bluescope shares advanced after the company announced it would buy back shares and ended the day up 2.9 per cent at $17.53.
Seven West Media shares jumped 4.3 per cent to to 73¢. The broadcaster is in negotiations over the broadcast of both cricket and tennis during the 2019 summer and could make a deal with Nine for the 2019 Australian Open.
On the downside, Orica posted a first-half loss of $229 million, compared with a profit of $195.2 million a year ago. The stock fell 6.4 per cent to $19.
Syrah Resources fell 4.9 per cent to $3.14. The stock remains one of the most shorted on the Australian market.
Blue Sky shares fell after it removed its market guidance and said chairman John Kain would step down. The company's shares fell 8.1 per cent to $2.50, trading below short seller Glaucus' $2.66 a share valuation.
Stock watch
AMP
UBS has given AMP a "sell" recommendation, downgrading it from "neutral" as the royal commission fallout continues. The broker has downgraded the stock's target price as well, falling from $5.40 to $3.80. It said that that a change in cost bases associated with compliance and monitoring systems aimed at adviser misconduct as well as declining confidence in major vertically aligned wealth managers would damage the company. "AMP, in our view, faces a two to three year rebuild before management, structural, operational and governance stability returns. Insurance turnarounds always take longer and cost more than initially anticipated," the broker said. It added that numerous risks and operational challenges could not yet be quantified and that it couldn't recommended the share on a 12-month view. AMP shares lost 0.5 per cent to $4.12.
What moved the market
US oil rigs
The number of rigs deployed in US oil plays rose last week from 825 to 834, hitting their highest level since March 2015. The increase in oil rigs has been on the back of stronger oil prices which have remained above $US60 a barrel throughout 2018. The increase in oil production could threaten to oversupply the market as OPEC members work to cut oil production levels. US production is forecast to list 14.7 per cent before rising another 7 per cent the year after according to the EIA. Despite the number of US oil rigs sitting at almost half the levels seen four years ago, US oil output has never been higher.
Aluminium
Aluminium prices rose to a two-week highon the back of reports out of Russia that sanctioned giant Rusal saw their aluminium exports fall 70 per cent in April as compared with the previous month. The data, from Russian Railways, showed that exports year-on-year fell 68 per cent. Deliveries to Russian destinations actually increased by 25 per cent compared to the month according to the data. This latest news pushed aluminium prices up 4.4 per cent on Friday to sit at $US2,370 a tonne. Prices had been declining in recent weeks as the market corrected, but this latest news has caused the price to spike again.
Euro
The euro has weakened against the US dollar in recent weeks driven largely by the positive performance of the greenback. The dollar last week jumped to its highest levels this year despite employment data coming in below expectations. Eurozone inflation data was unexpectedly slow during April with analysts now predicting that inflation will become more moderate. The euro didn't seem to react the comments by German Finance Minister Olaf Scholz who said that the Greek financial assistance program was nearing its end. The Greek economy has been performing well for a second consecutive year now as policy makers begin to discuss a post-programme framework. The euro recently traded at $1.1942 against the US dollar.
Business conditions
The NAB Monthly Business Survey for April showed that the business conditions index increased to its equal highest level since the survey commenced in March 1997. The survey results show conditions increased in all industries except for manufacturing and retail. NAB Group chief economist Alan Oster said the result was promising for economic growth. "The survey results for March are consistent with our outlook for the Australian economy," he said. "The strength in business conditions and leading indicators suggest economic growth will strengthen and that over-time we should see strong jobs growth and falls in the unemployment rate."