US optimism boosts local sentiment

THE sharemarket finished higher following a strong lead from Wall Street and encouraging local earnings reports. At the close on Wednesday, the benchmark S&P/ASX 200 index was 33 points, or 0.66 per cent, higher at 5036.6.

City Index analyst Peter Esho said stocks had been supported by local and international investors and regional markets remained resilient. "Material stocks have been quite weak over the past few weeks and there's some value buying coming through," he said. Earnings reports showed share values were relatively stable. "There's still some strong buying."

A weaker Australian dollar had also prompted offshore interest in local equities and pessimism in Europe had not filtered through to the local market.

The market opened higher after stocks in the US posted strong gains on reports of surprisingly robust new home sales and consumer confidence.

Locally, several major companies reported better-than-expected financial results, providing further momentum. AGL Energy provided the most upbeat earnings report, with first-half profit significantly higher due to new assets, while its underlying performance also improved. The shares rose 68¢ or 4.5 per cent, to $15.87.

Shopping centre developer Westfield Group lifted its annual profit by 18 per cent, and its shares were up 6¢ at $11.14.

QBE Insurance, which has a large exposure to the US market, was another strong performer, up 43¢ at $13.18. Engineering company UGL disappointed the market, with a 53 per cent drop in first-half profit due to restructuring costs. Its shares were down 60¢ to $10.30.

The four big banks were mostly higher, with Commonwealth the best performer, up 54¢ to $66.01. ANZ was up 12¢ to $28.28, National Australia Bank was 8¢ stronger at $30.03 but Westpac was down 3¢ to $30.20.

Among the miners, BHP Billiton was up 34¢ to $36.69 and Rio Tinto up 44¢ to $66.01.

Meanwhile, bond futures were higher as traders moved into safe-haven assets, amid nervousness about US budget negotiations and eurozone instability after the Italian election.

UBS interest rate specialist Matthew Johnson said weak domestic construction data added to the pessimistic tone of the day. He said there were concerns about the unclear Italian election result and worries over the possibility of a US government shutdown if Congress and the White House could not agree on proposed budget cuts.

The March 10-year bond futures contract was trading at 96.690 (implying a yield of 3.310 per cent), up from 96.645 (3.355 per cent) on Tuesday. The three-year contract was at 97.290 (2.710 per cent), up from 97.260 (2.740 per cent).