Shares get boost from China data

Australian shares have surged higher this afternoon as China, the world’s second biggest economy, posted growth of 8.9 per cent in the last three months of 2011, beating economist forecasts even as export demand moderated.

In recent trade, the benchmark S&P/ASX200 index was up 56 points, or 1.4 per cent, to 4203.2 and the All Ordinaries gained 56.2 points, or 1.3 per cent, to 4265.1.

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Shares extended early gains driven by a strong sale of French treasury bills overnight, despite news that the EU’s second-largest economy was stripped of its top credit rating by Standard & Poor’s on Friday.

News that Fortescue Metals, Australia’s third largest iron ore producer, reported it shipped a record 14.77 million tonnes of iron ore in the December quarter sent the company’s shares up three per cent and boosted the mining sector.

Investors would now look to economic news from China for direction as major miners Rio Tinto and Fortescue release their production forecasts for iron ore, Austock Securities senior client adviser Michael Heffernan said.

“China will be the focus of today’s attention with gross domestic product and industrial production data out later,” he said.

Forecasters predict fourth quarter economic growth from Australia’s largest trading partner to moderate to around 8.7 per cent, which would be the slowest rate of expansion since early 2009.

“A reasonable production report (from Rio and Fortescue) coupled with some good figures from China could see some good gains in the resources space,” said Mr Heffernan.

At 1203 AEDT on Tuesday, the benchmark S&P/ASX200 index was up 44.2 points, or 1.1 per cent, at 4,191.4, while the broader All Ordinaries index was up 44 points, also 1.1 per cent, at 4,252.9.

On the ASX 24, the March 2012 share price index futures contract was up 37 points at 4,165, with 7,238 contracts traded.

Miners and energy led the pack to claw back Monday’s losses after oil and metals prices staged a relief rally overnight, despite S&P’s widely-expected downgrade to the European’s rescue fund.

News of Fortescue’s record production last year dragged Rio Tinto up one per cent to $4.75 on hopes that the company will also report a surge in production later on Tuesday.

Analysts expect Rio to show a rise of more than 25 per cent in iron ore output over the previous quarter, while BHP could expand its output by as much as 23 per cent when it reports on Wednesday.

BHP Billiton – the market’s heftiest stock – added 1.4 per cent to $36.46 to drag up the resources sector by 1.3 per cent.

“The latest anouncement from Fortescue is helping confidence in the mining sector,” Commsec chief economist Craig James said.

“We’re at the point where China is looking to invigorate their economy and this is going to help our mining sector.”

Uranium miner Paladin Energy surged 10 per cent to $1.6825 after it reported record production in the three months to December and re-affirmed its full-year production targets.

OM Holdings also posted a turnaround from sharp losses this morning to add five per cent to 42.5 cents after the manganese miner said it expected to post a loss of about $12 million for the 2011 calendar year, due to the high Australian dollar and several one-off costs.

Volumes were light as US markets were closed on Monday for the Martin Luther King day holiday.

-The Age