The Australian market for once joined in with other global equity markets and rallied hard on Friday, with the gains helping the index mark its first positive week in three.
By the close of trading, the ASX had gained 58 points, or 1 per cent to reach 5710. For the week, the ASX advanced 0.4 per cent. The All Ordinaries index climbed 57 points and also added 1 per cent to trade at 5777.
The Australian dollar traded at US77.55?? as the currency continued to suffer following Thursday's very weak retail sales data as traders continued to downgrade expectations for an Australian interest rate next year.
Interest rates are expected to climb in the US, however, as soon as December as economic data continues to improve.
A fresh batch of well-received economic data as well as hawkish Federal Reserve talk helped the S&P 500 stretch its streak of gains out to the longest since 2013 on Thursday, with bank shares rallying as US 10-year yields climbed.
The MSCI World (ex-Australia) has already outperformed Australian equities by about 9 per cent year to date, Morgan Stanley strategists noted. They expect this outperformance to continue in the coming months.
"The global synchronised recovery is gaining traction while a lack of inflationary pressures is allowing key central banks to tighten slowly," the strategists said. "The current late-cycle environment of low real rates, better growth and low volatility should lift 'animal spirits' in the next six to 18 months."
At the same time. the earnings outlook "remains subdued" for Australian companies, they said, as local activity weakens and the dollar remains relatively strong. "In this context, we reiterate our preference for growth players, especially within the materials sector," they said.
Miners rallied hard on Friday, with BHP climbing 2 per cent and Rio Tinto advancing 1.9 per cent. Some of the smaller mineral extractors made steeper gains, with Orocobre up 6 per cent and Sandifre Resources up 3.6 per cent.
Materials were the best performing sector over the week, gaining 2.3 per cent, with Galaxy Resources up 19.4 per cent, Orocobre higher by 15.4 per cent, Western Areas up 11.4 per cent, Mineral Resources higher by 9.2 per cent and Syrah Resources up 6.3 per cent.
Banks were also strong on Friday, with CBA ending the session up 1.3 per cent, NAB climbing 1.1 per cent, ANZ advancing 1.3 per cent and Westpac up 1.3 per cent. Macquarie ended the day higher by 1.4 per cent.
Financials were stronger over the week, with the sector up 0.6 per cent, while healthcare stocks rose 1.1 per cent.
Some of the worst stock performers over the week were outdoor advertising company HT&E, down 10.9 per cent, APN Outdoor Group, down.7 per cent, Technology One, down 5.8 per cent, Origin Energy, down 5.5 per cent, and Myer, down 4.2 per cent.
The worst performing sector for the week was the utilities sector, down 2.5 per cent, while another sector favoured by yield hunters, real estate stocks, lost 0.8 per cent over the week and telecoms fell 1.1 per cent.
Stock Watch: NetComm Wireless
Investors poured into broadband technology company NetComm Wireless on Friday, scooping up the stock after it plummeted to a two-year low earlier in the week. Investors have punished Netcomm since the company released its full-year results. Despite posting a 26.3 per cent increase in revenue to $107.6 million, NetComm saw earnings before interest, tax, depreciation and amortisation fall 41.1 per cent to $3.6 million. But investors seemed to think the stock has fallen far enough and sent the price rocketing as much as 12 per cent to $1.21 a share before the stock closed flat at $1.08.
The Australian dollar continued to retreat after Thursday's unexpectedly weak August retail sales report challenged recent speculation that the Reserve Bank will raise interest rates anytime soon. A resurgent greenback pressured most G10 currencies as well, following some strong US economic data and hawkish commentary from Federal Reserve officials. The Aussie was US77.55?? at market close on Friday. "For the US dollar, it is all about non-farm payrolls data tonight and especially wages - given the print on jobs will be dampened by the impact of the hurricanes. While both the Fed and the market seem fairly committed to a December hike, pricing beyond that is at risk. The Australian dollar will be driven by US rate dynamics," ANZ economists said.
Golden week woes
Shares in Macau casino operators sank after visitor arrivals from mainland China over the Golden Week holidays disappointed. Galaxy Entertainment tumbled as much as 5 per cent, the most in three months, while Sands China fell 4.4 per cent, poised for its biggest loss since December. The stocks were the biggest losers on the Hang Seng Index on Friday. Mainland tourist arrivals fell 5.1 per cent in the first four days of the holidays, according to Macau's tourism office. That compared with analyst estimates for mid-high single digit growth, said Alfred Lau, Hong Kong-based analyst at Bocom International. "Valuations for those stocks are very high, so any minor disappointment could trigger a big sell-off in the sector, " Lau said.
A subdued outlook for oil and gas prices over the next two years is likely to limit growth in Australia's LNG export earnings, according to a key federal government economic forecaster. The slack is likely to picked up by higher earnings from iron ore and metallurgical coal in the current financial year before earnings decline in fiscal 2019, according to a quarterly report by the government's Department of Industry, Innovation and Science. LNG export revenue forecasts were cut by $1.8 billion to $30.26 billion in 2017/18 and by $3.3 billion to $35.4 billion next year. Despite lower earnings from LNG, overall earnings from resource and energy exports will rise to a record $211 billion in the 2017-18, as higher prices for iron ore and metallurgical coal boost revenues.
There was a flurry of bond futures selling on Friday, particularly in Aussie 10-year bonds, after a sale of debt due in May 2028, according to reports by Bloomberg. Ten year yields have now erased all the declines made after Thursday's worse-than-expected retail-sales report. The increase in volumes may reflect dealers who are long the underlying from the auction, selling futures to hedge the position, suggested a trader. The move also coincides with a break below Thursday's low, the level seen ahead of soft retail-sales data. Ten year bond yields were at 2.81 per cent.