The Australian share market has closed higher as investors rotate from the mining sector into the big banks as expectations of interest rate hikes strengthen.
The benchmark S&P/ASX200 index ended the day up 25.6 points, or 0.45 per cent at 5,720.6 points.
IG chief market analyst Chris Weston said investors were shifting from the mining sector into the financial sector.
He said banking stocks were doing well in Australia and in overseas markets as bond yields moved up amid heightened expectations of interest rate hikes, especially in the US, UK and Europe.
"The banks have benefited from that sort of global bank reflation trade that's been happening there," Mr Weston said.
Mr Weston said investors are awaiting the next meeting of the US Federal Reserve later this week for commentary on the timing of the next interest rate hike.
On the local bourse, among the big four banks Westpac added 0.7 per cent to $31.67, National Australia Bank gained 1.1 per cent to $31.20, and Commonwealth Bank lifted 0.5 per cent to $76.69.
ANZ was up one per cent at $30.18.
ANZ on Monday responded to media reports that it had received two overseas offers to buy its wealth business - one of those offers above $4 billion - to say only that talks on the future of the business were ongoing.
The major miners were mixed following another fall in the price of iron ore, which has dropped $US2, to around $US70.
Global miner BHP Billiton inched up 0.1 per cent to $26.28, Rio Tinto eased 0.2 per cent to $66.67, and Fortescue Metals dropped 2.7 per cent to $5.40.
Gold miner Evolution Mining, which has agreed to sell its Edna May gold mine in Western Australia to Ramelius Resources for up to $90 million, was down 0.4 per cent at $2.40.
Energy stocks also lifted on the back of well-supported oil prices.
Woodside Petroleum rose 0.4 per cent to $28.52, Oil Search improved 1.8 per cent to $6.92, and Santos found 1.5 per cent at $3.97.
Meanwhile, the Australian dollar has benefited from a weaker US dollar on the back of a mixed bag of economic data, and was trading at 80.24 US cents at 1630 AEST, up from 79.96 US cents on Friday.
ON THE ASX:
* The benchmark S&P/ASX200 closed up 25.6 points, or 0.45 per cent, at 5,720.6 points.
* The broader All Ordinaries index closed up 23.2 points, or 0.4 per cent, at 5,779 points.
* The September SPI200 futures contract was up 28 points, or 0.49 per cent, at 5,720 points.
* National turnover was 2.8 billion securities traded worth $4.9 billion.
CURRENCY SNAPSHOT AT 1700 AEST:
One Australian dollar buys:
* 80.18 US cents, from 79.96 on Friday
* 89.313 Japanese yen, from 88.49 yen
* 67.12 euro cents, from 67.06 euro cents
* 59.02 British pence, from 59.51 pence
* 109.7 NZ cents, from 110.38 cents
GOLD:
The spot price of gold in Sydney at 1700 AEST was $US1,315.12 per fine ounce, from $US1,329.75 per fine ounce on Friday.
BOND SNAPSHOT AT 1630 AEST:
* CGS 4.50 per cent April 2020, 2.0488pct, from 2.0015pct
* CGS 4.75pct April 2027, 2.7488pct, from 2.6909pct
In the U.S., the S&P 500 clung to a small gain on Monday, led by financial stocks ahead of a Federal Reserve meeting, while Nasdaq pared gains sharply as technology stocks lost ground late in the day.
The Dow Jones Industrial Average .DJI rose 64.8 points, or 0.29 percent, to 22,333.14, the S&P 500 .SPX gained 3.73 points, or 0.15 percent, to 2,503.96 and the Nasdaq Composite .IXIC added 6.17 points, or 0.1 percent, to 6,454.64.
The dollar rose to a more-than seven-week peak against the yen as investors awaited clues from the U.S. Federal Reserve on the timing of further rate hikes and tensions over North Korea eased.
The S&P 500 was nearly flat, cutting early gains following a decline in tech shares. MSCI’s index of world stocks was up 0.1 percent after earlier touching an intraday record high.
A relatively quiet North Korea and U.S. Secretary of State Rex Tillerson’s comments on a “peaceful solution” over the weekend eased some concerns for investors.
But an address by U.S. President Donald Trump to world leaders at the United Nations on Tuesday and elections in Germany and New Zealand will add extra political uncertainty to the mix this week.
The main event, however, will be the Fed’s meeting on Tuesday and Wednesday, at which it is likely to take another step toward policy normalization in what is rapidly becoming a worldwide trend.
The central bank is expected to announce plans to begin unwinding its $4.2 trillion portfolio of Treasuries and mortgage-backed securities, nearly a decade after the global financial crisis.
This prospect may be prompting the sell-off in sectors such as utilities, while it is boosting banks, said Stephen Massocca, senior vice president at Wedbush Securities in San Francisco.
“There’s momentum in the market. There’s lots of cash. Even though the Fed’s about to reduce their balance sheet you continue to have incredibly aggressive monetary policy. That continues to lead to money flowing into the market almost in an indiscriminate fashion,” he said.
Investors are far from persuaded the Fed will move on rates again this year, with a December change put at less than a 50 percent probability in the futures market.
Benchmark 10-year Treasury notes were last down 7/32 in price to yield 2.226 percent. The yield fell to 2.016 percent on Sept. 8, the lowest since Nov. 10, 2016.
The dollar was up 0.5 percent against the Japanese currency at 111.38 yen.
The Bank of Japan is widely expected to maintain its massive asset buying campaign at a meeting on Thursday.
Political uncertainty may have a part to play in the BOJ’s thinking. Sources told Reuters on Sunday that Japanese Prime Minister Shinzo Abe was considering calling a snap election for as early as next month to take advantage of his improved approval ratings and disarray in the main opposition party.
Canada has already raised interest rates twice in recent months, while the Bank of England shocked many last week by flagging its own coming increases. The European Central Bank, meanwhile, is expected to shed more light on plans to exit its extraordinary stimulus next month.
Source: Netwealth Morning Business Roundup
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