Banks, telcos buck European unease

AUSTRALIAN shares have closed slightly higher, driven by gains in the telecommunications and financial sectors.

By InvestSMART · 15 May 2012

By InvestSMART ·
15 May 2012

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AUSTRALIAN shares have closed slightly higher, driven by gains in the telecommunications and financial sectors.

But gains remained limited as concerns about Europe's debt woes and political uncertainty weighed on investors.

The benchmark S&P/ASX 200 Index rose 11.9 points, or 0.3 per cent, to 4297, while the broader All Ordinaries Index rose 9.2 points, or 0.2 per cent, to 4351.9.

The rise was driven by monetary easing in China but the gains were held back by losses in the resources sector, a market strategist at IG Markets, Stan Shamu, said.

China's central bank reduced its reserve required ratio - freeing up cash to lend - to stimulate the economy after disappointing import and export economic data last week.

"There was a lift in risk assets early on, particularly in the resource space, but, unfortunately, through the day the uncertainty coming from Greece weighed on most of the risk assets," Mr Shamu said.

New elections may have to be called in Greece, a prospect that is dreaded by the European Union as it could mean further delays to promised structural reforms.

High dividend paying bank and telco stocks performed well on the ASX.

Commonwealth Bank was the best performer of the big banks, rising $1, or 1.9 per cent, to $52.40.

ANZ was 16? higher at $22.20, National Australia Bank was 25? higher at $24.80 and Westpac was 65? lower at $22.07 after it went ex-dividend.

The big miners were mixed but the overall sector was down. BHP Billiton was firmer for most of the day but edged off highs after an executive said he could not rule out a write-down of shale gas assets.

BHP rose 9?, or 0.3 per cent, to $34.46, Rio Tinto fell 7? to $61 and Fortescue Metals fell 5? to $5.34.

Telstra extended its recent rally, rising 4?, or 1.1 per cent, to close at $3.64.

Also supporting exporters was a dip in the Australian dollar to multi-month lows below parity, helping exporters such as blood products maker CSL rise 1 per cent.

The rare earths producer Arafura Resources jumped 1.8 per cent after confirming it was talking with a range of potential investors for its Nolans project.

The fertiliser and explosives maker Incitec Pivot rose 0.3 per cent despite a 20 per cent fall in underlying earnings. The firm's explosives unit's earnings surprised, vindicating expansion and lifting investor mood.

National turnover was 1.5 billion securities worth $4.1 billion and 401 stocks were up, 551 down and 426 unchanged.

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Frequently Asked Questions about this Article…

How did Australian shares perform today on the ASX and what were the headline index moves?

Australian shares closed slightly higher: the S&P/ASX 200 rose 11.9 points (0.3%) to 4,297 and the All Ordinaries Index gained 9.2 points (0.2%) to 4,351.9. Gains were led by telecommunications and financial stocks but were limited by weakness in the resources sector and European political concerns.

What drove the strength in bank and telco stocks on the ASX today?

High-dividend paying bank and telco stocks performed well, supporting the market. Commonwealth Bank was the best performer among the big banks, rising $1 (1.9%) to $52.40. Other major banks such as ANZ and National Australia Bank also traded higher, while telco Telstra extended its recent rally, closing at $3.64 (up about 1.1%).

Why were resource and mining stocks mixed, and which miners moved noticeably today?

The overall resources sector was down despite some intraday strength driven by China-related demand hopes. BHP Billiton was firmer for most of the day but eased from session highs after an executive said a write-down of shale gas assets couldn't be ruled out; BHP closed around $34.46. Rio Tinto fell to about $61 and Fortescue Metals fell to about $5.34.

How did China's monetary easing affect ASX share movements?

China's central bank cut the reserve requirement ratio, freeing up cash to lend and aiming to stimulate the economy after weak import/export data. That move lifted risk assets early in the session—particularly in the resource space—but gains were later tempered by uncertainty stemming from Greece.

What role did European uncertainty (Greece) play in market sentiment?

Concerns about Greece's debt situation and possible new elections weighed on investor sentiment and limited gains across many risk assets on the ASX, offsetting some of the positive impact from China’s policy easing.

Did currency moves influence Australian exporters, and which companies benefited?

Yes. The Australian dollar dipped to multi-month lows below parity, which supported exporters. For example, blood products maker CSL rose about 1% as a weaker AUD typically helps exporters' competitiveness and earnings in local-currency terms.

Were there any notable smaller-cap corporate updates that moved share prices?

Arafura Resources jumped about 1.8% after confirming it was in talks with a range of potential investors for its Nolans project. Incitec Pivot rose around 0.3% despite a 20% fall in underlying earnings, helped by surprisingly strong results from its explosives unit that vindicated expansion plans.

What was the trading turnover and overall market breadth on the ASX today?

National turnover was 1.5 billion securities worth about $4.1 billion. Market breadth showed 401 stocks up, 551 down and 426 unchanged.