Australia Shares up 1.1% on US Optimism; Retail Sales Temper Gains

   By Rhiannon Hoyle 
 

SYDNEY--The Australian share market trimmed early gains Monday after weaker-than-anticipated retail sales data, although strong jobs numbers out of the U.S. last week kept stocks firmly in positive territory.

A 0.4% dip in retail sales in March disappointed the market, which had expected a 0.1% rise, sparking concerns a recovery in consumer spending may be slowing.

Still, Australian shares were propped up by optimism over the health of the U.S. economy, after Friday's strong employment data prompted another record-breaking session on Wall Street. Confidence over the outlook for China's economy was also returning, traders said.

"There is an overall feeling out there today that resources equities are ripe for a bounce post the encouraging U.S. jobs report figures and the view that downbeat perceptions of the Chinese economy have gone too far," Anson Rosewall, institutional dealer at BBY, said.

At 0224 GMT, the benchmark S&P/ASX 200 was up 1.1% at 5,187, after an early jump to 5,201.3.

Karoon Gas Australia Ltd. (KAR.AU) led the stock market higher after reporting a new oil discovery offshore Brazil. Shares in the company, which has now discovered oil in two out of three wells drilled in the Santos Basin with Colombian joint venture partner Pacific Rubiales Energy Corp. (PRE.T), were up 23%. At their session high, they were up 28% at A$5.12, the stock's highest value since early April.

Lynas Corp. Ltd. (LYC.AU) jumped 18% to its highest level in more than a month. The stock rallied after Malaysia's prime minister, Najib Razak, Sunday won a tightly fought election, alleviating concerns that a new government could suspend the rare earths producer's license for its controversial processing plant there.

Chemicals and explosives maker Orica Ltd. (ORI.AU) was up 1.8% after posting a rise in first-half profit and saying it expected to report higher annual earnings this fiscal year despite continuing weakness in key markets.

BBY's Mr. Rosewall said improved market sentiment also appeared to have spurred some short-covering and dip buying in "second tier" resources companies such as Alumina Ltd. (AWC.AU), which traded up 5.2%, Iluka Resources Ltd. (ILU.AU), which was up 6.4%, and PanAust Ltd. (PNA.AU), which rose 8.3%.

The nation's largest resources groups, BHP Billiton Ltd. (BHP.AU) and Rio Tinto Ltd. (RIO.AU), traded up 2.9% and 3.2%, respectively.

Australian building materials company Boral Ltd. (BLD.AU) underperformed after warning its profit could fall as much as 11% this fiscal year due to a weak local housing market and high Australian dollar. It traded down 2.6%.

Investors will now focus on Tuesday's meeting of the Reserve Bank of Australia, analysts say. CMC Markets Chief Market Analyst Ric Spooner said the weak retail sales figure for March would likely increase market expectations of a rate cut.

The RBA, which has left interest rates unchanged since December, has cut rates six times since November 2011 in a bid to stoke parts of the economy like retail and manufacturing as mining companies cut investment.

A relatively tame inflation reading Monday could help leave room for the central bank to reduce rates at its policy meeting.

The TD Securities-Melbourne Institute Monthly Inflation Gauge showed the pace of inflation in Australia stayed well within the central bank's comfort zone last month, with a rise of 2.1% from a year earlier. The Reserve Bank of Australia's annual target range for inflation is between 2% and 3%.

Write to Rhiannon Hoyle at [e-mail]