Australia: Shares nudge 4 1/2-month highs before slipping on oil price

[SYDNEY] Australian shares touched a 20-week intraday high before paring gains on Thursday as a rout in energy stocks caused by plummeting oil prices overshadowed expectations of an imminent interest rate cut.

After oil prices plumbed six-year lows overnight, large energy companies warned of spending and earnings cuts, sending the stocks lower.

But banks, retailers and other stocks said to benefit from lower interest rates gained as the oil price slide, coupled with lacklustre domestic economic data in recent days, added to expectations that the Reserve bank of Australia will cut rates at a Feb 3 meeting. "The energy sector is getting smashed, as expected," said Evan Lucas, market strategist at trader IG Markets.

However, he added that "we are alive and kicking for a rate cut next Tuesday", citing figures which showed December quarter exports were flat despite higher prices.

The S&P/ASX 200 index rose as much as a third of a percentage point to its highest since Sept 11, before trimming gains to be up 0.1 per cent or 6.5 points at 5559.3 by 0225 GMT.

Among energy producers, Woodside Petroleum fell 2.21 per cent and Santos dropped 4.3 per cent. Oil Search dipped 2.8 per cent after announcing plans to cut spending and warning of an impairment charge of up to US$200 million for 2014.

Beach Energy fell 4 per cent after saying it will cut spending by 20 per cent because of the oil price slide.

Non-oil resources fared better. Iron ore producer Fortescue Metals Group gained 5 per cent after saying cost-cutting had allowed it to continue operating profitably. BHP Billiton and Rio Tinto each fell half a percentage point.

Among banks, which are expected to write more home loans if interest rates fall, Commonwealth bank of Australia and Australia and New Zealand Banking Group each rose half a percentage point. National Australia Bank rose 0.3 per cent.

Furniture and electronics retailer Harvey Norman rose 1.7 per cent and rival JB Hi Fi rose 1.2 per cent amid expectations they will increase sales if borrowing costs fall.

New Zealand shares were marginally higher but trimmed their gains after hitting a lifetime high for the fifth consecutive session.

The benchmark NZX-50 index was up 3.5 points at 5,798.31, after hitting a record 5,820.14 after the Reserve Bank of NZ said it would hold rates for some time and might cut them.

The biggest listed company Fletcher Building bounded 1.4 per cent higher to NZ$8.44 as the RBNZ singled out the strong construction market.

Contact Energy, the number three stock, rose 1 per cent to a six-year high of NZ$7.22.

REUTERS