Strong support for mining stocks helped the sharemarket snap a three-day run of losses, as BHP reported bumper profits and iron ore and metals prices pushed higher.
The benchmark S&P/ASX 200 index lifted 24 points, or 0.4 per cent, to 5750, as it continued to meander within a tight range. Global investor attention is fixed on this weekend’s Jackson Hole central banking summit in the US, and a lack of strong leads from overseas have also kept the local bourse contained and helped investors focus on another busy schedule of profit results.
Resources was the standout sector on Tuesday. BHP Billiton gained 1.1 per cent as the mining giant tripled its dividend payment and said it would sell its shale oil asset in the United States. Those results followed similarly solid earnings numbers from Rio Tinto and Fortescue, all of which, when combined with a spot iron ore price that was pushing $US80 a tonne on Monday night, lifted the sector and the ASX with it. Rio Tinto added 1 per cent and Fortescue 1.4 per cent.
South32 was a notable exception, as the diversified miner slipped 0.3 per cent.
While BHP’s result was broadly well received, Citi analysts were disappointed that the Big Australian hadn’t announced any further capital returns.
“The decision to exit US onshore will generally be viewed positively, although it looks like shareholders will have to wait a while longer before capital management, excluding dividends, kicks off in earnest,” the Citi analysts wrote in a note to clients.
Oil Search led the energy sector higher after its earnings release helped spur a 3.3 per cent gain in the stock.
Among other well-know names, Sydney Airport added a healthy 3.4 per cent as the company’s management said they had “increased confidence” in the outlook and raised their dividend guidance as part of its half-year earnings release. Seven Group surged 8.9 per cent after the company announced profits and that it had sold its Caterpillar business in China.
The Big Four banks were broadly supportive, with Westpac the standout as it climbed 0.8 per cent, while ANZ eased 0.4 per cent. Wesfarmers, owner of Coles supermarkets, was the heaviest individual weight on the market, falling 2.9 per cent as it traded ex-dividend. Rival Woolworths’ releases earnings on Wednesday.
The sharpest share price moves were once again felt among the cohort of smaller reporting companies. Software business Aconex slumped 10 per cent, while Corporate Travel Management – one of the most heavily shorted stocks on the market – dropped 5.4 per cent.
Stock watch Monadelphous
Engineering services firm Monadelphous Group’s annual profit fell 14 per cent over the past financial year as competition and reduced spending by customers put pressure on its margins. The company provides construction, maintenance and industrial services, and made a net profit of $57.6 million in the year to June 30, down from $67 million in the prior year. It said a fall in activity in the construction market was partially offset by increased maintenance activity. The company said market conditions in the Australian resources and energy sector have stabilised, and it expects an increasing number of resources construction opportunities in the coming years. Investors liked the sound of that, sending the stock up 5.2 per cent to $14.48 on Tuesday. Market moversBulk run
Iron ore’s mid-year rally has been so powerful that the raw material has clocked up a 50 per cent surge in less than 50 days, rewarding bulls for their optimism about Chinese demand while handing bears further reason to be cautious about the outlook for 2018 as supply may expand. Spot ore climbed 2.6 per cent to $79.93 a tonne on Monday evening, the highest level since April. That’s 50 per cent above than the year’s low point of $US53.36 hit on June 13, with prices posting gains in nine of the past 10 weeks. Block party
Earnings releases from a number of recently-listed companies has meant strategic investors and directors who took a stake pre-IPO are now able to sell out. Analysts at FNZC on Tuesday noted that TPG Capital’s 47 per cent stake (around $610 million) was due to come out of escrow after chicken producer Inghams reported full-year profits. The stock dropped 4 per cent to $3.36 on the day. The analysts added: “Bravura Solutions (around $160 million) and Kogan (around $90 million) also come off escrow, while ReaWise Holdings’ approximately $950 million WiseTech stake comes off escrow [on Wednesday]”. Black and Blue
BlueScope Steel recovered some of Monday’s heavy losses as analysts said investors had overreacted to Monday’s earnings release. While BlueScope’s profits had fallen short of its own guidance, the sell-off was overdone, UBS analysts said, retaining their “buy” recommendation. Macquarie analysts kept their “outperform rating”, noting that while BlueScope’s updated outlook was “undoubtedly weak”, but they too believe a 22 per cent plus plunge on Monday was an overreaction. The shares climbed 5.4 per cent to $11.62 on Tuesday. Brent, not broken
The global crude oil benchmark drifted 0.3 per cent higher on Tuesday, with Brent fetching $US51.82 a barrel in late trade after dropping 2 per cent on Monday night. Traders are eyeing weekly US inventories data due Wednesday night. “Oil will remain under pressure while we see US production continue to rise, that’s the swing factor,” said Fat Prophets analyst David Lennox. “Prices will probably remain between $US45 and $US50 a barrel. To break out of that range we’ll need to see OPEC cut deeper, or demand will have to be more sustainable outside of the seasonally strong period.”