Listed energy companies were the big winners on the ASX on Tuesday as a jump in oil prices fuelled solid gains in the sector, but that wasn't enough to prevent another disappointing session on the ASX.
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The benchmark S&P/ASX 200 index quickly gave up early gains and endured a late slump to end the day down 12 points, or 0.2 per cent, at 5671, as it headed back toward the bottom of the roughly 100-point trading range it has been stuck in since the middle of May.
Oil and gas producers were the standout performers of the session as Santos climbed 3.5 per cent, Oil Search rose 2.8 per cent, Woodside advanced 2.9 per cent and Beach Energy climbed 4.6 per cent. The sector overall advanced 1.9 per cent.
The gains came after Brent crude surged to its highest in more than two years on Monday night as Turkey threatened to shut down Kurdish oil shipments through its territory.
The sharp rise in energy stocks on Tuesday could likely be explained by traders shifting their positions, Contango Asset Management's chief investment officer George Boubouras said.
"I think that most people were on the wrong side of the energy move and are just trying to put some pragmatism back in," he said. "We'll be looking at this energy move as the price appears to be moving well ahead of fundamentals."
The moves in the energy sector weren't enough to offset losses in the financials, with banks taking a sharp turn lower in late afternoon trade.
CBA shares ended the day down 0.9 per cent and ANZ declined 0.5 per cent, while NAB managed to end 0.2 per cent higher and Westpac closed up 0.1 per cent.
Some of the biggest miners were also weighing on the benchmark as falling iron ore prices weighed on the market. BHP fell 0.7 per cent, Rio Tinto lost 0.2 per cent, and South32 dropped 1.2 per cent. Fortescue declined 1.9 per cent after Morgan Stanley analysts downgraded the stock.
Retailers also struggled on Tuesday, with Harvey Norman down 3 per cent and Domino's Pizza, 2.4 per cent lower. Premier Investments extended a fall from the previous session when it revealed its results to lose another 4.3 per cent through Tuesday's session.
However, Kathmandu's shares surged 7.4 per cent after the outdoor leisure retailer's earnings showed it bucking the poor retail trend. The group revealed that new products, sharper pricing and better online content helped it lift net profit 13.5 per cent to $NZ38.04 million in 2017.
Also reporting earnings, crop protection group Nufarm dropped 2.5 per cent despite tipping more earnings growth after posting a 316 per cent jump in net profit to $114.5 million for the 12 months to July 31.
Stock watch
Harvey Norman
Following on from an emerging theme among ASX-listed retail companies, Harvey Norman is one of a number of consumer names that look likely to boost capital returns to shareholders, UBS analysts say. In a note to clients, the broker's team reckons says August reporting season saw companies in the consumer sector "re-assess capital management strategies", pointing to already announced buybacks from Domino's Pizza and Treasury Wine Estates. Harvey Norman has made specific reference to potential buy-backs, the analysts point out. The company's franking balance is among the highest in the ASX, and current gearing gives it around $500 million of headroom to increase net debt. The UBS team reckon a $300 million buyback would add 4-5 per cent to earnings per share. Woolworths and Flight Centre could be looking to boost capital returns, the UBS analysts say.
Movers
Kiwi confidence
New Zealand business confidence plunged to a two-year low in the run-up to a cliff-hanger general election, led by fears of a downturn among manufacturers. A confidence index compiled prior to the weekend's ballot sank to zero from 18.3 in August, ANZ Bank New Zealand said on Tuesday. "While this is probably an overreaction and could reflect temporary seasonal or election-related drags, the survey details consolidate our sense that growth has topped out," JP Morgan economist Ben Jarman said.
Oily bull
US oil prices returned to bull-market territory while the global Brent benchmark hit two-year highs, as traders pushed the commodity higher in response to threats by Turkey to block Kurdish oil supplies across its territory. Investors are also becoming more confident that OPEC countries will continue to cut production in an effort to bring demand in the oil market into line with supply. Brent oil traded at $US59.22 in late Tuesday trade, up 0.3 per cent over the session after jumping 3.8 per cent o Monday night.
Asia jitters
The escalating war of words between the leaders of North Korea and the United States continued to dampen the mood in Asian markets, with most of the region's bourses trading in the red on Tuesday alongside their currencies. "The fever pitch between the two [countries] and the increased shows of force do raise the likelihood that an accident or miscalculation could lead to conflict," Stratfor analysts wrote. Gold and bonds were in favour as investors looked to familiar safehavens in times of trouble. Japan's yen strengthened for a third day.
BHP's bounty
China's $US1.3 trillion Belt and Road Initiative, or BRI, will help support steel output and export growth in the world's largest producer for the next 10 years, according to BHP. BRI projects could result in as much as 150 million tonnes of incremental steel demand, with 80 per cent used in structures and reinforced concrete, and the rest going into machinery and other equipment, BHP said in a blog post Tuesday. "Among the range of possibilities we consider, our base case remains that Chinese steel production is yet to peak," the company said.