March 6, 2018 / 2:00 AM / in 5 months

Oil prices, receding trade war fears support Australia shares; NZ up

* RBA interest rate decision due later in the day

* BHP Billiton biggest boost to Australia’s benchmark index

* Gains largely broad-based in NZ

By Christina Martin

March 6 (Reuters) - Australian shares bounced off four straight sessions of declines on Tuesday, with the materials and financial sectors outperforming, taking their cue from a jump in oil prices and an upbeat U.S. market.

The S&P/ASX 200 index rose 1.3 percent, or 74.5 points, to 5,969.5 by 1252 GMT, gaining most in nearly four weeks. The benchmark closed down 0.6 percent on Monday.

Crude prices thrived on forecasts for robust oil demand growth and concerns that output from OPEC producers would grow at a much slower pace in coming years, lending support to the materials and energy sectors.

The metals and mining index gained as much as 2.4 percent to mark its biggest intraday percentage gain in more than two weeks.

BHP Billiton Ltd rose more than 3 percent, making it the top advancer on the main index, while fellow heavyweight Rio Tinto Ltd scaled up 0.9 percent.

Pemex, Mexico’s state-run oil company, plans to reach out to BHP among others to form new joint ventures for two deepwater blocks it won in a January auction.

Financial stocks rose as much as 1.1 percent, with the ‘Big Four’ banks adding between 0.1 percent and 1.1 percent, following a rally in U.S. stocks. Investors moved to the view that Trump’s tariffs threat was a negotiating tool after he tweeted that Canada and Mexico could avoid his proposed tariffs if they ceded ground in the North American Free Trade Agreement (NAFTA) talks.

“There is a bit of hope given what we have heard from the U.S. President that the tariffs may be linked to NAFTA negotiations and may not actually proceed. Now that’s not clear-cut obviously; if we get more clarity going the other way, the markets might reverse,” said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

“I think there is still substantial risk in the market but in the shorter term, I think the market is assuming a bit more positive approach to the tariffs so we’ve seen a bounce in the U.S. markets and that is flowing through to Australia.”

Australia’s central bank is seen as all but certain to keep its cash rate at a record low of 1.5 percent at its monthly policy meeting next week, a Reuters poll of economists found.

Among top gainers on the main index was telecom operator Telstra Corp Ltd, up as much as more than 2 percent, its biggest intraday percentage gain in nearly five weeks.

Telstra confirmed a deal with News Corp to combine Foxtel and Fox Sports Australia, two months after Australia’s competition watchdog dropped its opposition to the merger.

New Zealand’s benchmark S&P/NZX 50 index also edged higher, up 0.4 percent, or 35.83 points, to 8,315.66.

Utility, healthcare and materials stocks led the gains on the index, with construction materials maker Fletcher Building Ltd being the best performer, rising as much as 3.5 percent to its highest in almost two weeks.

Reeling from spiralling costs and deep losses in major projects, New Zealand’s second-largest company by revenue, flagged in February that losses were NZ$660 million, even larger than anticipated last year, and that it was exiting the commercial construction business.

Reporting by Christina Martin in Bengaluru Editing by Eric Meijer

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