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Australia Market extends gain on global stimulus talk, trade optimism

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Headline indices of the Australia share market advanced on Tuesday, 20 August 2019, as risk sentiments bolstered on tracking positive lead from Wall Street overnight after encouraging comments from President Donald Trump and other officials on trade talks. Meanwhile, buying sentiments cemented after the Reserve Bank of Australia's (RBA) July meeting minutes, released on Tuesday, showed the central bank would consider further easing. Furthermore, People's Bank of China (PBOC) debut of its new loan prime rates (LPR) under a new mechanism to lower borrowing costs for companies and reports that Germany may also be considering stimulus measures underpinned gains for stocks. Around late afternoon, the benchmark S&P/ASX200 index inclined 62.76 points, or 0.97%, to 6,530.20. Meanwhile the broader All Ordinaries index, which tracks the nation's 500 biggest listed companies, advanced 62.31 points, or 0.95%, to 6,612.80.

U. S. stocks rallied on Monday, on growing hopes that major economies would act to stymie the slowing economic effects of escalating global trade tensions. The Dow Jones Industrial rose 249.78 points, or 1%, to end at 26,135.79, while the S&P 500 index added 34.97 points, or 1.2%, to close at 2,923.65. The Nasdaq Composite Index advanced 106.82 points, or 1.4%, to finish at 8,002.81.

Investors were encouraged by growing hopes that major economies would act to stymie the slowing economic effects of escalating global trade tensions. People's Bank of China (PBOC) debut of its new loan prime rates (LPR) under a new mechanism to lower borrowing costs for companies, close on the heels of news of a potential German economic easing.

The People's Bank of China (PBOC) debuted its new loan prime rates (LPR) under a new mechanism that was unveiled over the weekend. The new 1-year LPR was set at 4.25%, as compared to 4.31% previously. The 5-year LPR was at 4.85%.

Meanwhile, German Finance Minister Olaf Scholz over the weekend suggested the government could come up with $55 billion in stimulus if needed.

The Commerce Department said Monday that it has given Chinese telecom giant Huawei Technologies Co. Ltd. another 90-day reprieve during which it can continue to do business with American companies, without the granting of case-by-case licences that would otherwise be needed, after the Commerce Department added it to its entity list in May.

Meanwhile, market participants are awaiting for Wednesday's release of minutes from the Fed's July policy meeting, when the central bank cut rates for the first time in more than a decade, and Federal Reserve Chairman Jerome Powell speech at a central banks meeting in Jackson Hole on Friday to signal that a fed-funds rate cut will be delivered at the central bank's next meeting Sept. 17-18.

BHP Group (BHP) shares fell 0.3% after Australia's largest mining company reported a lower than expected underlying profit for the year. BHP's divestment of their US shale assets for far less than the market expected was a key disappointment this year, as were the losses associated with the Samarco Dam disaster.

Kogan Ltd (KGN) was up 7.4% after posted a 21.9% lift in full year profits to $17.2 million on 6.4% rise in revenue and a 15.9% increase in active customers for the year. Sonic Healthcare (SHL) shares libed 2.6% after reported a full year net profit of $549.7 million, stating its strategy of building scale in the U. S. through deals and partnerships with hospitals helped to drive its 16% rise in annual net profit.

ECONOMIC NEWS: The weekly ANZ-Roy Morgan consumer confidence rating fell by 2.3 per cent to 112.8 points. Consumer sentiment is now below the average of 114.5 points held since 2014 and the longer term average of 113.1 points since 1990.

Minutes of the August 6 Reserve Bank Board meeting were released. After cutting rates in June and July, Reserve Bank Board members thought it appropriate to assess the landscape before deciding the next move on rates. But the Board noted that a 25 basis point was fully factored in by financial markets for November and a similar reduction expected in 2020.

CURRENCY NEWS: The Australian dollar, a liquid proxy for emerging market and China risk, was firmer against greenback on Tuesday. The Australian dollar was at $0.6768 after seeing highs above $0.678 in the previous session.

COMMODITY NEWS: Oil prices slipped in the Asian trading hours. The international benchmark Brent crude futures contract was fractionally lower at $59.69 per barrel, while U. S. crude futures declined 0.27% to $56.06 per barrel.

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, August 20 2019. 09:19 IST