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ASX ends positive hours before budget

Steven Deare
·4-min read

Australia's share market has finished higher on the strength of the materials and energy sectors and a late rally before the federal budget.

The S&P/ASX200 benchmark index closed higher by 20.5 points, or 0.35 per cent, to 5962.1 on Tuesday.

The All Ordinaries index finished up by 29.1 points, or 0.47 per cent, to 6164.2.

Energy rose 2.32 per cent and materials gained 1.11 per cent.

The smaller information technology sector had a good session, too, up 2.3 per cent.

The ASX traded lower for the first few hours despite a good lead from US markets.

The late rally started about when the Reserve Bank decided to keep the cash rate at a record-low 0.25 per cent.

Reserve Bank governor Philip Lowe said he believed the bank's policies were working well, although fiscal and monetary support would be required for some time given the prospect of high unemployment.

Macquarie Private Bank division director Lucinda Chan said the US lead, and the miners and energy companies, were responsible for the ASX result.

While the ASX rose after the cash rate decision, Ms Chan believed this might have been due to light trading volumes.

School holidays are on in much of Australia, while people in China are enjoying the Golden Week holiday.

"There are not many people around to look at this market," Ms Chan said.

"So anything can push markets up when trading is so thin."

The federal budget is due on Tuesday night, which is expected to contain record spending to help the economy out of the coronavirus recession.

Some analysts cited this as a reason for gains on the ASX on Monday and Tuesday. Ms Chan was not convinced it mattered to global investors.

Meanwhile, consumer confidence has risen for a fifth straight week.

The weekly ANZ-Roy Morgan consumer confidence index has risen to its highest level since late June, and is more than 10 per cent above a recent trough in August.

Other data showed Australia's trade position took a big hit in August.

The Australian Bureau of Statistics said the trade surplus of goods and services almost halved in the month, to $2.6 billion from $4.7 billion in July.

This was the result of exports tumbling four per cent, while imports rose by two per cent.

On the market, goldminers Northern Star and Saracen Mineral announced a $16 billion merger.

Northern Star would acquire all shares in Saracen.

Saracen shareholders would receive 0.3763 Northern Star shares for each Saracen one. Saracen would also pay a special, fully-franked dividend of 3.8 cents per Saracen share.

Shares in Northern Star ended up by 10.64 per cent to $15.29.

Shares in Saracen were higher by 9.58 per cent to $5.72.

Among the major miners, BHP edged up by 0.39 per cent to $36.28 after it took an additional 28 per cent interest in the Shenzi oil and gas field in the Gulf of Mexico.

The purchase cost $US505 million ($A704 million) and gives the miner 72 per cent control.

Rio Tinto gained 0.33 per cent to $96.02 and Fortescue climbed by 1.7 per cent to $16.74.

Insurance Australia Group was down early but gained 0.22 per cent to $4.64 after agreeing to pay $138 million due to a class action.

The claims centred on insurance products sold through car and motorcycle dealers.

IAG expects an after-tax impact of less than $50 million.

In banking, ANZ gained 0.51 per cent to $17.89, the Commonwealth was up 0.24 per cent to $66.15, NAB rose 0.27 per cent to $18.24 and Westpac was better by 0.69 per cent to $17.41.

Earlier in the US, Wall Street rallied as hopes for economic aid from Washington helped it recover all its knee-jerk losses after learning President Donald Trump tested positive for the coronavirus.

The market's rally accelerated after Mr Trump wrote on Twitter that he would leave hospital, which he did.

The Aussie dollar was buying 71.64 US cents at 1719 AEDT, lower from 71.81 US cents after the close of trade on Monday.

ON THE ASX

* The S&P/ASX200 benchmark index closed higher by 20.5 points, or 0.35 per cent, to 5962.1 on Tuesday.

* The All Ordinaries index finished up by 29.1 points, or 0.47 per cent, to 6164.2.

* At 1719 AEDT, the SPI200 futures index was higher by one point, or 0.02 per cent, to 5950.

CURRENCY SNAPSHOT

One Australian dollar buys:

* 71.64 US cents, from 71.74 US cents on Monday

* 75.69 Japanese yen, from 75.73 yen

* 61.80 Euro cents, from 61.18 cents

* 55.17 British pence, from 55.48 pence

* 107.92 NZ cents, from 108.01 cents.