After four consecutive days of losses which sent the S&P/ASX200 Index down 4.3%, the benchmark index has risen as much as 2% today as investors snapped up stocks across the board. All 10 sub indexes rose, with telecommunications shares notably the biggest gainers – led by Telstra which climbed as much as 2.4%.
At 1241 AEST the index had gained 59.74, or 1.3%, to 4,715.70 after rising as high as 4,749.70 before midday. The index has fallen 145 points since June 20.
Whiplashed repeatedly by overseas markets that have turned sour or buoyant at economic data, the Australian stock market was helped by a US report that consumer confidence in the world’s biggest economy is at its highest level in five years as new home sales rose 2.1% in May.
That helped stocks of companies who derive a large portion of their revenue from the US. Share registry operator Computershare added 17.5 cents, or 1.7%, to $10.555. Pallet and plastic container provider Brambles increased 14 cents, or 1.6%, to $9.05. News Corp.’s Australian shares rose 41 cents, or 1.4%, to $30.31.
Telecommunication stocks surged. Fibre optics network carrier Amcom rose 6.5 cents, or 3.6%, to $1.865. Telstra added 10 cents, or 2.2%, to $4.62.
Investor concerns were also calmed by a pledge by China’s central bank to provide liquidity to stabilise money markets after signs of a crunch that sent the overnight repurchase rate to a record last week. The People’s Bank of China is clearly indicating it will not tolerate bank failures, says Nomura. China is the biggest buyer of Australian iron ore and coal.
Shares in Rio Tinto, the world’s biggest iron ore producer, increased $1.18, or 2.4%, to $51.42. BHP, the world’s biggest mining company, rose 48 cents, or 1.6%, to $31.29, at 1241 AEST.
If a rally in stocks is to be sustainable today’s trading volume has to reach $5 billion, according to Tony Paterno, a senior client advisor at Ord Minnett. If US economic growth data this week fails to live up to expectations then US and Australian stocks globally may suffer, Paterno says.