RTTNews - The Australian stock market ended in positive territory on Tuesday, led by resource stocks, which gained on higher commodity and oil prices in the international market. Strong closing on Wall Street on positive economic data and bankruptcy filing by GM, a decision by the RBA to leave interest rates unchanged as expected and better than expected new building approvals data helped lift market sentiment.
In the U.S., a slew of positive economic data lifted the market sentiment on Monday. A report released by the Institute for Supply Management showed that the ISM index of activity in manufacturing sector rose to 42.8 in May from 40.1 in April, signaling a slower pace of contraction in activity in the manufacturing sector in the month of April. Economists had been expecting the index to edge up to a reading of 42.0. A turnaround in new orders contributed to the improvement in the sector, with the new orders index climbing to 51.1 in May from 47.2 in April. This marked the first time the index has been above 50 since November of 2007.
A report released by the Commerce Department showed that construction spending unexpectedly increased in the month of April, reflecting a notable increase in spending on private construction. In a separate report, the Commerce Department stated that personal income unexpectedly rose in the month of April, with the increase partly due to the reduced taxes and increased social benefit payments associated with the government's economic stimulus plan.
The Dow closed up 221.11 points or 2.6% at 8,721, the Nasdaq finished up by 54.35 points or 3.1%, at 1,829, and the S&P 500 rose 23.73 points or 2.6% to 943.
The All Ordinaries Index opened unchanged from its previous close at 3,888 and immediately surged past the psychological 3,900-mark. Resource stocks led the gains on higher commodity and oil prices. The decision by the RBA to leave interest rates unchanged as well as better-than-expected new building approvals data influenced the market. The index finally ended the trading session near the day's high at 3,948, up 60.20 points, or 1.55%. The benchmark S&P/ASX 200 Index followed a similar trend and ended up at 3,955, with a gain of 60.30 points, or 1.56%.
On the economic front, the Australian Bureau of Statistics revealed that the number of houses and apartments approved for construction increased a seasonally adjusted 5.1% in April from the level of March. The Bureau noted that approvals for private sector homes were up a seasonally adjusted 7.2% month-over-month, but down 8.5% on year. In a separate report, the Bureau revealed that the net operating balance of the general government sector showed a deficit of A$7.7 billion in the March quarter, higher than the deficit of A$3.2 billion in the December quarter.
In another development, the Reserve Bank of Australia decided to leave its key interest rate unchanged as expected for the second consecutive month. Governor, Glenn Stevens said monetary policy has now eased significantly. Market and mortgage rates are at very low levels by historical standards and business loan rates stayed below average. Although much of the effects are yet to be realized, fiscal steps are supporting demand.
Resource stocks led the gains in the market on higher commodity prices. BHP Billiton advanced 2.69%, Iluka Resources rose 3.16%, Orica gained 5.75%, Oz Minerals added 4.44% and Rio Tinto increased 4.03%.
Crude oil prices ended weaker by $0.58 to $68.03 a barrel in Asian trading. Light crude oil price for July delivery closed at $68.58 in New York Mercantile Exchange on Monday on expectation of a rise in demand and weaker dollar.
Woodside Petroleum gained 2.00%, Santos added 0.34% and Oil Search advanced 1.22%. In a statement, Woodside Petroleum stated that it is planning to retain at least 50% equity in the second and third stages of its Pluto LNG development at Karratha in Western Australia.
Banking stocks ended mixed following the decision of the RBA to leave interest unchanged. ANZ Bank slipped 1.30% and Westpac Banking lost 0.95%, but Commonwealth Bank added 0.47% and National Australia Bank gained 1.24%.
Among gold stocks, Sino Gold added 0.47%, and New crest Mining rose 0.47%. However Lihir Gold bucked the trend and shed 0.30%.
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