ASX edges higher despite healthcare sell-off


“Investors will get more bullish on stocks when the S&P 500 makes a new high. We are less than 2 per cent away from this mark.”

Resource stocks rose on Thursday as positive Chinese economic data gave investors hope that the country would increase its consumption.

Rio Tinto rose 1.4 per cent to $97.74 and Fortescue Metals Group climbed 0.9 per cent to $7.48.

Whitehaven Coal shares rose 6.4 per cent to $4.46 after its Winchester South metallurgical coal project had been declared a “Coordinated Project’. The declaration paves the way for whole-of-government assessment of the project by way of an environmental impact statement.

The major banks also rose with some more modest gains. Commonwealth Bank rose 0.2 per cent to $73.41, Westpac advanced 0.1 per cent to $26.83 and ANZ lifted 0.2 per cent to $26.78.

NAB shares also closed higher despite announcing it would pay an additional $525 million to customers. Its shares rose 0.1 per cent to $25.27.

Galaxy Resources slid 11.6 per cent to $1.64 after announcing it had officially ended its search for a joint-venture partner for its Sal de Vida project. The company had been on the search for a partner for its flagship lithium project in Argentina since the end of last year, however it announced on Thursday it had not been able to find an appropriate partner.

Local health stocks followed the healthcare burn on Wall Street on Wednesday, spooked by UnitedHealth Group who expressed deep concern about Presidential hopeful Bernie Sanders’ “Medicare for all” plans, saying it would cause wholesale disruption to the American health care industry.

ResMed shares fell 4 per cent to $13.60, CSL slid 1.3per cent to $190.51, Cochlear shares declined 2.1 per cent to $175.75, Australian Pharmaceutical Industries closed 4.9 per cent lower at $1.45 and Nanosonics went down 1.8 per cent to $4.48.

Stock watch

DULUXGROUP

Morgan Stanley retained its ‘underweight’ recommendation on DuluxGroup in spite of the acquisition offer from Nippon Paint. While the broker lifted its price target to be in-line with the Japanese company’s offer price, it recommended investors capitalise on the bid drive share price rise and sell. “Our underweight view on DuluxGroup was predicated on meaningful headwinds for earnings from a weak housing and consumer backdrop and a stretched valuation,” said analyst Andrew Scott. “None of these factors has changed and with the valuation now expensive we would look to capitalise on the current share price.” The broker discounted the likelihood of a rival offer, saying the likeliest bidder Akzo was unlikely to match or exceed Nippon’sd bid. Morgan Stanley lifted its price target on DuluxGroup from $6.50 to $9.80.

What moved the market

COMMODITY DEMAND

China’s economy grew ahead of expectations in the March quarter, with industrial production one of the key driving factors behind the strong performance. Industrial production for March rose from 5.3 per cent for the year in January and February to 8.5 per cent for the year in March. Forecasters had been expecting growth of just 5.9 per cent. “All in all, China’s commodity intensive sectors showed positive signs in March and suggest that China’s commodity demand may already be accelerating,” said CBA mining & energy commodities analyst Vivek Dhar. “That is earlier than we originally expected and raises upside risks to our demand profile for China in 2019.”

PALLADIUM

Palladium prices rose firmly on Wednesday as investors bet positive economic data from China would increase vehicle manufacturing. The price of palladium rose 3 per cent to $US1,397.49 an ounce. “Strong GDP data from China showed the economy is starting to hit back up again…greater growth will see the economy expanding, translating into more demand for vehicles, in turn boosting demand for both platinum and palladium,” RJO Futures senior commodities strategist Phillip Streible told Reuters. Palladium and platinum are primarily used by automobile manufacturers for making catalytic converters.

AUSSIE DOLLAR

The Australian dollar rose on Thursday after the March labour force figures came in ahead of expectations, pushing back any potential future rate hikes. The RBA had noted in its April meeting minutes that it would consider cutting rates if the unemployment rate rose and inflation remained stagnate. While the unemployment rate rose from 4.9 per cent to 5 per cent in March, full time employment increased by 48,300. While part time employment fell by 22,600, overall employment increased by 25,700, ahead of expectations of a 15,000 rise. The Australian dollar rose 0.2 per cent immediately following the release of the figures.

William McInnes covers markets from Sydney including editing the Markets Live blog.

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