The Australian share market has recovered from a poor start to close higher, but most of the big banks still face some pressure after the Turnbull government’s budget announcement of a $6.2 billion levy on the big banks.
The banks fell heavily at the start of trade on Wednesday, dragging the overall market lower with them, but recovered some of their lost ground over the session.
IG chief market strategist Chris Weston said gains among resources stocks pushed the Australian bourse into positive territory.
Banking shares suffered on Tuesday when the government’s move to impose the levy was leaked.
Mr Weston said that despite most of the big banks closing lower again on Wednesday, investors may be thinking that they overshot on the sell-off on Tuesday.
“The fact that we’re seeing some buying today shows that yesterday we were trying to find that equilibrium, what it (the levy) meant, and we may have over-exaggerated a touch yesterday,” Mr Weston said.
Mr Weston said the Turnbull government’s budget was seen as market friendly, and market reaction to it had been modestly positive.
“But I don’t think anyone is sitting there going ‘this is fantastic’,” he said.
Mr Weston said resources stocks had been sold down recently on fears that growth in the Chinese economy was softening, but investors may be thinking that it’s time to dip their toes in the water.
He said China’s April producer price inflation numbers released on Wednesday had clearly peaked, which suggested that the Chinese government may not have to be so prudent with some of its monetary levers.
The big miners had also benefited from a rise in iron ore futures overnight.
Among the major banks, Commonwealth Bank was 0.35 per cent lower at $81.73, Westpac backtracked 0.7 per cent to $32.65, National Australia Bank dropped 0.68 per cent to $32.20, but ANZ rose 0.79 per cent to $29.39.
Investment bank Macquarie Group, which is also subject to the federal government levy, eased 0.56 per cent to $91.94.
In the resources sector, global miner BHP Billiton lifted 1.51 per cent to $23.51, Rio Tinto added 2.06 per cent to $60.00, and Fortescue Metals surged 5.12 per cent to $5.13.
Building products supplier CSR plunged 11.8 per cent to $4.56 after unveiling a fall in earnings from its aluminium division.
Meanwhile, the Australian dollar was trading slightly higher against its US counterpart at 73.56 US cents at 1700 AEST, up from 73.39 US cents on Tuesday.
Mr Weston said the federal budget had had little impact on the dollar.
ON THE ASX AT1630 AEST:
* The benchmark S&P/ASX200 was up 35.5 points, or 0.61 per cent, to 5,875.4 points
* The broader All Ordinaries index was up 36.6 points, or 0.62 per cent, to 5,911.1 points.
* The June SPI200 futures contract was up 45 points, or 0.77 per cent, at 5,871 points.
* National turnover was 2.65 billion securities traded worth $8.4 billion.
CURRENCY SNAPSHOT AT 1700 AEST:
One Australian dollar buys:
* 73.56 US cents, from 73.39 on Tuesday
* 83.909 Japanese yen, from 83.284 yen
* 67.56 euro cents, from 67.29 cents
* 56.72 British pence, from 56.75 pence
* 106.65 New Zealand cents, from 106.60 NZ cents
GOLD:
The spot price of gold in Sydney at 1700 AEST was $US1,221.60 per fine ounce, down $US6.20 from $US1,227.80 on Tuesday
BOND SNAPSHOT AT 1630 AEST:
* CGS 5.25 per cent March 2019, 1.6956pct, from 1.7251pct
* CGS 4.25pct April 2026, 2.5987pct, from 2.6243pct
Sydney Futures Exchange prices:
* June 2017 10-year bond futures contract at 97.310 (implying a yield of 2.690pct), from 97.285 (2.715) on Tuesday
* June 2017 3-year bond futures contract at 98.100 (1.900pct), from 98.080 (1.920pct).
(*Currency closes taken at 1700 AEST previous local session, bond market closes taken at 1630 AEST previous local session)
