Australia: Shares recover losses as Santos approach sparks energy rally

[SYDNEY] Australian shares narrowed early losses on Thursday as a rally in oil producer Santos, sparked by a US$5.1 billion takeover approach, injected buying interest in resources beaten down by lower commodity prices.

Overnight the prices of oil, gold, copper and key Australian export iron ore fell amid concerns about inventory build-up and soft demand growth.

However Santos revealed before the start of trading that it had received, and rejected, an informal offer from Scepter, a fund backed by the ruling families of Brunei and the United Arab Emirates, sending its shares up to 20 per cent higher.

After falling as much as 0.6 per cent in early trading, the S&P/ASX 200 index recovered to be down 0.2 per cent or 11.6 points at 5,236.7 by 0120 GMT. The benchmark is down more than 3 per cent so far in 2015. "It's a fairly mundane market but the bid for Santos is clearly the highlight," said James McGlew, executive director of corporate stockbroking at Argonaut. "It's a good sign for the Australian resources sector on a whole, that they have got people dipping their toe in."

Other energy stocks rose. Energy producer-retailer Origin Energy added 4 per cent, Woodside Petroleum gained 0.4 per cent and Oil Search gained 1 per cent.

In the broader resources sector, BHP Billiton dipped 1 per cent and rival Rio Tinto declined 0.5 per cent, while gold producer Newcrest droped 4 per cent. BHP spin-off South32 rose 2 per cent after saying September alumina production rose 8 per cent.

In the major banks, Australia and New Zealand Banking Group eased 0.5 per cent while National Australia Bank and Commonwealth Bank of Australia both fell about 0.2 per cent.

Health insurer Medibank fell nearly 3 per cent as brokers downgraded their recommendations, citing weaker revenue guidance than previously expected.

New Zealand stocks were modestly higher and on track to post their 10th session of gains although the market appeared to lose some momentum as it approached its 2015 peak.

The benchmark S&P/NZX 50 index edged up 0.1 per cent, or 7.8 points, to 5,926.05, having climbed as far as 5,931.38, a high last seen in early August.

It is closing in on its 2015 high of 5,963.05 set on Aug. 3, having gained 6.0 per cent so far this month, a blistering pace for the start of the fourth quarter.

Helping underpin the rally, Westpac Banking Corp climbed 2.7 per cent, glass product maker Metro Performance Glass gained 2.7 per cent while financial services provider Heartland New Zealand put on 1.6 per cent.

REUTERS