Banks, stimulus hopes drive up stocks

THE sharemarket rose strongly yesterday, buoyed by hopes for more economic stimulus in China and the United States.

THE sharemarket rose strongly yesterday, buoyed by hopes for more economic stimulus in China and the United States.

The benchmark S&P/ASX 200 Index gained 35.5 points, or 0.8 per cent, to 4361.3. The big banks did most of the heavy lifting, accounting for 62 per cent of the advance, with Commonwealth Bank rising 88? to $55.06 and National Australia Bank 32? to $25.40.

The big miners also did well after the price of iron ore hit $US100.20 a tonne on Tuesday night, up from $US95 on Monday. Chinese officials had flagged their willingness to provide more economic stimulus, if required, which boosted commodity prices yesterday.

Analysts said there was also a lot of optimism built into the market before key events in Europe and the US: the US Federal Reserve's Open Market Committee meeting, and the Dutch elections.

"I think there are some bargain hunters around for the banks, because they've been walloped a little bit recently," said Henry Jennings, of Cameron Stockbrokers. "We've seen in the past that we've had resources up and banks do nothing, but today we've got a little bit of both."

European markets opened stronger last night after Germany's top constitutional court cleared the way for the permanent eurozone rescue fund, rejecting bids to halt German ratification of the ?500 billion ($A616 billion) backstop, while imposing some conditions on its use.

Approval of the European Stability Mechanism is a vital part of a European Central Bank plan to defuse the eurozone debt crisis by buying struggling peripheral countries' bonds in the secondary market.

The big miners continued to criticise the Queensland government for its plan to increase coalmining royalties.

BHP Billiton chairman Jacques Nasser told a business lunch in Melbourne the decision was "unbelievable", "counterproductive". He said it would put more pressure on miners already struggling under declining coal prices, a high dollar and high labour and capital costs.

But mining stocks still performed well, thanks to the bounce in the price of iron ore. BHP Billiton was 27? higher at $32.85, while Rio Tinto rose 56? to $55.09. Fortescue shares were up 10?, or 3 per cent, at $3.47.

Fish farmer Clean Seas Tuna was 0.4? higher at 2? after it said it would reduce its workforce by half and sell boats in response to shrinking numbers of yellowtail kingfish.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles