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Miners rebound but energy stocks remain out of gas

A bullish US growth outlook from US Federal Reserve chairman Jerome Powell and a solid update from mining giant BHP boosted sentiment on the Australian sharemarket.

Following a 0.4 per cent gain on the US S&P 500 index last night the S&P-ASX 200 index climbed to a 0.8 per cent gain before slipping to close up 41.5 points, or 0.67 per cent, at 6245.1 as miners led the rebound on a weaker Australian dollar and only the energy sector lost much ground.

Global stocks shrugged off trade-war fears after Mr Powell reiterated the Fed’s upbeat outlook to the US Senate while saying risks were balanced.

“US equities liked Powell’s upbeat US economic assessment and lack of imminent concerns over trade policy,” National Australia Bank strategist Rodrigo Catril said.

“On trade, a pragmatic Powell said that it was too soon to say how trade policy would influence the Fed’s thinking. So the key take away is that trade policy has not yet affected the Fed’s intentions for further gradual hikes.”

But the Australian dollar dropped US0.7¢ to US73.60¢ as Mr Powell’s comments boosted the US dollar.

UBS economist George Tharenou said the escalating US-China trade tensions were negative for global growth, but the impact for Australia should be relatively modest, “absent deterioration to an all-out trade war”.

He said higher tariffs increased the cost of trade, lowering trade volumes and related industrial production and commodity demand and prices, but the impact on the domestic economy would be cushioned if the dollar weakened, the focus remained targeted on high-tech goods and Chinese policy responded to support the economy.

Government 10-year bond yields slipped 2 points to 2.637 per cent and US 10-years were unchanged at 2.86 per cent.

The Shanghai composite initially bounced 0.5 per cent but was flat at the close of the ASX as investor money continued to switch to the housing market at the expense of stocks.

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