Woodside drives leap within energy sector

The sharemarket closed higher, led by a surge from Woodside Petroleum and broader gains among high-yielding stocks.

The benchmark S&P/ASX 200 recorded its highest close for the month, after adding 49.6 points, or 1 per cent, to finish at 5016.2, while the broader All Ordinaries rose 47.2 points, or 1 per cent, to 5002.6.

The leap in the energy sector was largely driven by Woodside Petroleum, which declared a special dividend of US63¢ a share following its decision earlier this month to shelve its $40 billion Browse LNG venture.

It is forecasting a reduction in debt, given a decision to shelve the project, and will return excess cash to investors. Woodside shares jumped 9.7 per cent to $37.96.

Division director at Macquarie Private Wealth, Martin Lakos, said the market was beginning to refocus on yields. "If you look across the banks, telecommunications, all of those yield plays have been re-visited to some extent."

Among the banks, ANZ rose 2.4 per cent to $29.25, NAB added 1.4 per cent to $32.07, Westpac lifted 1.2 per cent to $31.71 and CBA gained 1 per cent to $70.01.

Mr Lakos said a lower than expected reading on China's HSBC flash PMI, a gauge of the country's manufacturing sector, hit miners, which were already trading lower. The reading came in at 50.5; economists had expected 51.5, but a result above 50 indicates growth.

Rio Tinto fell 2.1 per cent to $53.96 while rival BHP slipped 1.1 per cent to $31.36.

Asian-Pacific markets slumped after the PMI reading, with Chinese markets recording heavy losses, and the CSI300 index was down as much as 3.3 per cent.

The dollar dipped on the release of the data, hitting US102.21¢.

Deutsche Bank currency strategist John Horner said that after poor data out of China last week, particularly GDP, the dollar had priced some weakness in before the announcement.

In late trading the dollar recovered to around US102.30¢, after comments from the Reserve Bank's head of financial stability, Luci Ellis, suggested lower interest rates were beginning to work and house prices were starting to rise.

On the local equities market, Virgin shares pushed up 4.6 per cent to 45.5¢ after the Australian Competition and Consumer Commission approved the airline's bid for a 60 per cent stake in Tiger Australia.