ASX posts weekly gain as BHP rallies

Resources giant BHP Billitonis having a tough time of it lately. The benchmark ASX200 rose 1.1 per cent on Friday and 0.5 per cent for the week to 4916. Photo: Angus Mordant

Australian shares finished the week in positive territory as commodity prices continued to lift from recent record lows, aided by signals from Europe and Japan that central banks will add to stimulus if needed to boost the global economy.

Spurred on by a 7.4 per cent recovery rally in BHP Billiton, the benchmark ASX200 rose 1.1 per cent on Friday and 0.5 per cent for the week to 4916, while the All Ordinaries put on 1 per cent on Friday and 0.4 per cent for the week to close at 4969.6.

The European Central Bank opted to leave interest rates unchanged in its decision overnight, but ECB president Mario Draghi said it would consider easing in March  if the global market turmoil persisted.

“Downside risks have increased again amid heightened uncertainty about emerging market economies’ growth prospects, volatility in financial and commodity markets and geopolitical risks,” Mr Draghi said.

Meanwhile, reports out of Japan suggested the country’s central bank could add to monetary stimulus as early as next week to counter the hit to inflation from crude oil’s slide and a stronger yen, sparking a near-5 per cent surge in the Nikkei index.

The prospect of more monetary stimulus from key central banks also buoyed the Australian dollar on Friday, pushing it to a weekly high above US70¢.

AMP Capital chief economist Shane Oliver said central banks were “turning dovish”.

“This started with the Fed last week and now the ECB is signalling more easing at its March 10 meeting if things don’t improve.

“In the week ahead the Fed is likely to signal a pause in raising interest rates to allow it to reassess the outlook and the Bank of Japan is expected to either ease further or be more dovish.”

However, said Dr Oliver, it was too early to say Australian shares had recovered.

“With global growth worries likely to linger and US shares having only at a 13 per cent fall despite having more valuation concerns than other markets it’s too early to say that we have seen the low. So the Australian share market could yet be tipped into bear market territory.”

In major commodity news, the global iron ore trade may be disrupted after Vale, the world’s largest producer, was ordered by a Brazilian court to temporarily close one of its main ports following alleged environmental breaches. Futures for the raw material in Asia surged.

Aided by the Vale news and a recovery in commodity futures, BHP was one of the top performers on Friday, jumping 7.4 per cent for the day – and 1.2 per cent for the week – to $15.26 after struggling badly over the past weeks. The gains come after the miner’s stocks rose 10 per cent in London trade, leading a broader recovery rally in the sector.

Rio Tinto rose 3.3 per cent for the day and 0.3 per cent for the week to $39.65 and Fortescue also rallied hard, adding 6.2 per cent for the day, but finishing flat for the week, to $1.54.

The banks were lower for the week: Westpac 3.7 per cent to $29.93, National Australia Bank 0.3 per cent to $26.92 and Commonwealth Bank 2.9 per cent to $76.56, while ANZ Bank slumped 6.2 per cent to $23.35 on talk of a possible dividend cut.

Shares in Medibank Private rocketed 11.6 per cent for the day and 16.2 per cent for the week to $2.50  after the insurance giant upgraded its full year profit forecast.

Medibank Private says its full year operating profit is expected to exceed $470 million, $100 million above its previous guidance. This comes after unaudited figures show an operating profit of $270 million for the six months to December 31. Medibank said it had saved more money than expected by clamping down on improper claims.

The week’s best ASX200 performer was Treasury Wine Estates, after the Penfolds-maker’s half-year earnings exceeded expectations, boosted by strong demand in Asia.

Treasury Wine shares soared 17.5 per cent for the day and 19.7 per cent for the week to $9.28.

Treasury Wine said that pre-tax earnings in the six months to December are expected to be between $140 million and $150 million, beating market expectations of $120 million.

“Our Asia business performance is particularly pleasing as we benefited from increased shipments to the region ahead of Chinese New Year in February,” chief executive Michael Clarke said.

Full-year earnings are now expected to be at the upper end of Treasury Wine’s forecast range of $270 million to $290 million.

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