Banks lead market to 14-month high

THE sharemarket extended gains from Wednesday to close at a 14-month high, after weak retail sales boosted chances of another rate cut next month.

By InvestSMART · 5 Oct 2012

By InvestSMART ·
5 Oct 2012

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THE sharemarket extended gains from Wednesday to close at a 14-month high, after weak retail sales boosted chances of another rate cut next month.

Overall, the benchmark S&P/ASX200 Index rose 13.8 points, or 0.3 per cent, to finish at 4452.4, while the broader All Ordinaries rose 13.9 points, or 0.3 per cent, to 4472.7 points.

Financial stocks did much of the heavy lifting, adding 1 per cent, as mortgagors waited for the big banks to pass on some of the Reserve Bank's latest rate cut.

ANZ rose 25?, or 1 per cent, to $25.30 CBA rose 55?, or 1 per cent, to $56.55 NAB rose 20?, or 0.8 per cent, to $26.15, while Westpac rose 41?, or 1.6 per cent, to $25.77.

But most of those gains were erased by a depressed resource sector, after some of the large miners took a hit from a sharp drop in oil prices overnight.

BHP Billiton fell 44?, or 1.3 per cent, to $32.99, while Rio Tinto rose 23? to $53.95.

"What we've seen is similar to what happened in the US overnight, where domestic stocks did OK but global growth stocks, such as materials and energy companies, were a little bit soft," Ord Minnett senior analyst Craig Turton said.

"The oil price was under pressure because US output was very strong, hitting a 15-year high overnight, and people have been focused on the collapse in the Iranian currency [as a result of US-led sanctions]."

Retail sales climbed just 0.2 per cent in August, half the expected rise, adding to the case for another rate cut next month. For individual stocks, Billabong plummeted 24?, or 18.25 per cent, at $1.07, over speculation a second private equity firm was considering withdrawing its takeover bid for the troubled surf retailer.

ANZ rose after it said it would spend up to $1.5 billion improving branches and mobile banking products as it edges towards dumping PIN codes for futuristic facial and fingerprint scanning.

Qantas slipped 1?, to $1.22, after the airline said it was no longer seeking interim authorisation from the competition regulator for its proposed alliance with Emirates.

Retail Food Group was placed in a trading halt, last trading at $3, ahead of a planned capital raising and a change to the terms of its purchase of the Crust Gourmet Pizza Bars franchise system.

Transurban rose 6?, or 1 per cent, to $6.16, after the tollroad operator pushed for an overhaul of the way motorists are tolled to reduce traffic congestion.

with AAP

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Frequently Asked Questions about this Article…

Why did the ASX close at a 14-month high and what were the key index moves?

The sharemarket extended gains into a 14-month high after weak retail sales boosted the chances of another rate cut. The S&P/ASX200 rose 13.8 points (0.3%) to finish at 4,452.4, while the All Ordinaries gained 13.9 points (0.3%) to 4,472.7.

How did the big banks drive the market higher and which bank stocks rose?

Financial stocks led gains as mortgagors waited for banks to pass on potential rate cuts. ANZ rose about 25 cents (1%) to $25.30, Commonwealth Bank (CBA) gained about 55 cents (1%) to $56.55, NAB rose about 20 cents (0.8%) to $26.15, and Westpac added about 41 cents (1.6%) to $25.77.

What retail sales data affected investor expectations about Reserve Bank rate cuts?

Australian retail sales climbed just 0.2% in August — roughly half the expected rise — which strengthened the case for another Reserve Bank rate cut next month and helped lift local stocks.

Why did the resource sector drag on the market despite bank gains?

The resource sector was depressed after a sharp overnight drop in oil prices hit large miners. Some major miners lost ground, offsetting much of the financials' gains and weighing on the broader market.

How did oil prices and US production influence Australian miners?

Analyst Craig Turton noted oil was under pressure because US output hit a 15-year high overnight. That weaker oil environment, along with focus on currency moves in Iran, made global growth stocks such as materials and energy a bit soft, impacting miners' share prices.

What happened to Billabong shares and why did they plunge?

Billabong plunged about 24 cents (18.25%) to $1.07 amid speculation that a second private equity firm was considering withdrawing its takeover bid for the surf retailer, prompting heavy selling.

Which other notable company updates were reported and how did markets react?

Qantas slipped about 1 cent to $1.22 after saying it was no longer seeking interim authorisation for its proposed alliance with Emirates. Retail Food Group was placed in a trading halt after last trading at $3 ahead of a planned capital raising and changes to its franchise purchase terms. Transurban rose about 6 cents (1%) to $6.16 after pushing for an overhaul of tolling to reduce congestion.

Did any major miners see specific share price moves?

Yes. BHP Billiton fell about 44 cents (1.3%) to $32.99 while Rio Tinto rose about 23 cents to $53.95, showing mixed reactions within the large miners to the same market pressures.