You are here
Australia: Shares gain to 2-week high on rate-cut hopes, US-China trade deal
[BENGALURU] Australian shares rose 1 per cent on Monday to a two-week high as investors cheered an initial trade deal between the United States and China, and hopes for another rate cut gained steam after the government cut its outlook for growth in the economy.
The S&P/ASX 200 index climbed 1 per cent, or 64.9 points, to 6,804.6 by 0025 GMT, after hitting its highest since Dec 3.
Late on Friday, Beijing and Washington announced a "Phase one" agreement that reduces some US tariffs in exchange for what US officials said would be a big jump in Chinese purchases of American farm products and other goods.
Wall Street's overall reaction to the deal was lukewarm, with major stock indexes gaining marginally.
"Some would say the pact was a little underwhelming, short of expectation in terms of the rollback of US tariffs and the amount the Chinese would buy in agricultural goods," said James Tao, a market analyst at CommSec.
However, he said since US stock indexes were perched at record highs, the Australian market was now making up for lost ground.
The Australian benchmark index had shed about 1.6 per cent this month, as of last close, compared with a near 1 per cent gain in the S&P 500 index during the same period.
Meanwhile, Australia cut its outlook for growth in the economy and wages as part of a A$33 billion downgrade to expected revenues over the next four years, due to weak household spending and stagnant wage growth.
CommSec's Tao said the downgrade added fuel to hopes of a rate cut in the coming months. The Reserve Bank of Australia has already cut interest rates three times since June, taking them to a record low of 0.75 per cent.
Financial stocks, which have a heavy bearing on the index, rose nearly 1 per cent. All the "Big Four" banks traded higher, gaining between 1 per cent and 1.2 per cent.
Commodity prices rallied on the trade deal news, sending resource stocks higher.
Miners added 0.8 per cent, with BHP Group and Rio Tinto firming 1 per cent and 0.6 per cent, respectively.
Gold stocks also logged robust gains, with Newcrest Mining Ltd and Evolution Mining adding 1.5 per cent each.
Riding on oil prices, which hit a near three-month high on Friday, the energy index tacked on 0.8 per cent. Sector heavyweight Woodside Petroleum rose 0.9 per cent, while smaller rival Santos gained 1.7 per cent.
New Zealand's benchmark S&P/NZX 50 index fell 0.2 per cent, or 17.98 points, to 11,223.61. Dairy giant a2 Milk Company slipped 1.4 per cent, weighing on the index.