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Stocks hit 2014 high

The local sharemarket has risen to its highest close of the year, with mining stocks leading the gains and as investors remain focused on earnings season.

The benchmark S&P/ASX 200 Index added 26.6 points, or 0.5 per cent, on Monday to 5382.9, with the broader All Ordinaries Index also lifting 0.5 per cent.

Mining stocks led the gains after the release over the weekend of stronger than expected Chinese credit data provided support for global commodity prices.

Shares followed equity markets in the United States higher in the morning. Wall Street advanced after a preliminary private survey indicated consumer sentiment has improved in February. US earnings season has been helpful for global investor confidence. Roughly three-quarters of US-listed companies that have reported December half results have beat analyst expectations.

Domestically, the local reporting season continued to provide the main focus for investors.
“Earnings season is off to a strong start… most of the larger companies to report so far have exceeded expectations,” Citi equity strategist Tony Brennan said.

Roughly 20 per cent of ASX-listed companies have reported their most recent half year results over the past fortnight, with an avalanche of company results due in the coming weeks.


“Though still early, some positive trends have continued, with good growth in financial sector earnings, underpinned by the banks. This is compensating for still challenging conditions in other areas,” Mr Brennan said. “Meanwhile, cost discipline remains widespread, and is supporting better earnings growth than revenues would imply.”

Since February reporting season began Citi has upgraded its estimates for the market’s earnings growth this financial year by approximately 1 per cent.

Resources giant BHP Billiton rose 0.8 per cent to $38.02 ahead of delivering its interim result on Tuesday. Analysts expect the BHP Billiton to show it has continued to trim production costs. The exporter is also expected to show its profit has benefited from a combination of relatively stable oil, coal and iron ore prices during a period the Aussie dollar has depreciated.

A bumper result from rival Rio Tinto last week further raised market expectations.

After exceeding forecasts for earnings, cashflow and dividends on Thursday, Australia’s second largest resources company Rio Tinto put-on 2.4 per cent to $69.54 as analysts endorsed the result.

Iron ore miner Fortescue Metals Group rose 2.1 per cent to $5.82 as the spot price for iron ore, landed in China, rose 1 per cent to $US123.20 a tonne.

Aurizon Holdings, which provides rail freight haulage to miners, rose 1.8 per cent to a record $5.19 despite showing a 39 per cent drop in interim net profit. Investors were cheered by strong volumes and savings from slashing jobs and reducing the locomotive fleet.

Engineering contractor UGL slid 12 per cent to $6.23 after the group scrapped its interim dividend and downgraded its full year profit forecast.

Glove and condom manufacturer Ansell dropped 5.1 per cent to $18.31 despite posting a 14.9 per cent increase in net profit, boosted by successful new product lines. Overall sales growth was softer than some analysts expected.

The big four banks were all higher. Commonwealth Bank of Australia rose 0.3 per cent to $74.35, Westpac Banking Corporation added 0.5 per cent to $32.91, and ANZ Banking Group gained 0.9 per cent to $31.62. National Australia Bank was the standout among the big banks up 1.9 per cent to $34.75.

Regional lender Bendigo and Adelaide Bank rose 0.5 per cent to $11.78 after boosting its half-year cash profit by 9.5 per cent.

Telstra Corporation rose another 0.4 per cent to $5.22 after delighting shareholders by raising its interim dividend last week.

Food and household basics retailing was the worst-performing sector, down 0.1 per cent, as the biggest supermarket operators were mixed. Woolworths rose 0.3 per cent to $35.61, while Wesfarmers, owner of Coles, fell 0.6 per cent to $43.57 ahead of reporting interim result later this week.

Buru Energy was the worst-performing stock, dumping 18.8 per cent to $1.60, after delivering a disappointing drilling update on its key Ungani-3 oil well.

Resolute Mining was the best-performing stock up 11.5 per cent to 73¢ as the spot price of gold rose 0.5 per cent to $US1325.71 per ounce.

On Tuesday morning the local market will take its cues from Europe and Asia with US markets closed on Monday for the Presidents Day public holiday.