By Sarah Turner, MarketWatch
SYDNEY (MarketWatch) -- Australian shares closed with modest gains Friday, with early optimism over developments in the U.S. and Europe tempered slightly after the release of Chinese and local economic data.
The benchmark S&P/ASX 200 index /zigman2/quotes/210598100/delayed AU:XJO -0.05% closed at 4,239.60, an advance of 0.6%.
The move today brought week-to-date gains to 1% and year-to-date gains to 4.5%. The index is currently hovering around levels last seen in the first half of December.
“The broader picture for shares is looking more favorable: valuations are attractive, particularly against very low bond yields, the risk of meltdown in Europe has receded, the global recovery looks like it will continue, monetary conditions are easing and there is lots of cash on the sidelines,” said Shane Oliver, head of investment strategy at AMP Capital Investors.
With light sweet crude oil futures retaining a grip on the $100-a-barrel level, energy firms were among the best performers in Sydney trading. Petroleum giant Woodside Petroleum Ltd. /zigman2/quotes/206770672/composite WOPEF -0.95% gained 1.5%, while Beach Energy Ltd. /zigman2/quotes/200513631/delayed AU:BPT +4.21% shares rose 5%.
Mining firms also gained a bit of ground, with Fortescue Metals Group Ltd. /zigman2/quotes/202351558/delayed AU:FMG +0.84% up 2.6%.
European and U.S. stocks closed higher on Thursday, with the Stoxx 600 index /zigman2/quotes/210599654/delayed XX:SXXP -0.19% and the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.27% reaching multi-month highs.
On Thursday, Spain and France successfully sold 14.6 billion euros ($18.2 billion) in government bonds, reports emerged Greece may be close to a deal with its creditors, U.S. jobless claims fell to their lowest level in almost four years and data showed a tame reading on U.S. inflation.
Several companies exposed to the U.S. economy were advancing, with building products group Boral Ltd. /zigman2/quotes/208897707/delayed AU:BLD -3.47% up 2.6% and Aristocrat Leisure Ltd. /zigman2/quotes/202581837/delayed AU:ALL -0.29% shares climbing 3.3%.
Macquarie Group Ltd. /zigman2/quotes/206727308/delayed AU:MQG -0.69% /zigman2/quotes/209628452/composite MQBKY -0.23% gained in the banking sector, with the investment banking firm rising 3.2%. U.S. banks Morgan Stanley and Bank of America Merrill Lynch saw their shares rise notably in the U.S. trading day after reporting earnings.
However, Australian retail banks put in a weaker performance, with Westpac Banking Corp. /zigman2/quotes/203084975/delayed AU:WBC +0.70% /zigman2/quotes/210300378/composite WEBNF -0.99% shares up 0.4% and National Australia Bank Ltd. /zigman2/quotes/210431826/delayed AU:NAB -0.02% /zigman2/quotes/205253475/composite NAUBF +0.66% shares ending the session flat.
Data out today showed that Chinese manufacturing failed to grow in January, although contraction eased up a bit, according to HSBC’s flash manufacturing Purchasing Managers Index. The survey showed a reading of 48.8, from 48.7 last month.
It’s the third straight month of sub-50 reading for the index. A reading below 50 indicates contraction.
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“It will be a tough first quarter in view of an ongoing slowdown of domestic demand and weakening external conditions,” said Qu Hongbin, co-head of Asian economic research at HSBC, speaking about the prospects for the Chinese economy.
Additionally, data out from the Australian Bureau of Statistics out today showed that import prices rose 2.5% in the December quarter, while export prices fell 1.5%.
Annette Beacher, strategist at TD Securities, said that the “lethal combination” of export and import prices meant that the country’s terms of trade fell by 3.8% in the December quarter and are now 9.1% higher than a year ago.
“A peak in the terms of trade was widely anticipated but this is a little harsher than expected,” she said. “Historically, falling terms of trade implies shrinking company profits and lower inflation.”