Banks up as investors factor in rate cut

THE sharemarket closed mostly flat yesterday in quiet trade on what was a public holiday for most of the country, but the financial sector managed to finish the day on a high.

By InvestSMART · 2 Oct 2012

By InvestSMART ·
2 Oct 2012

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THE sharemarket closed mostly flat yesterday in quiet trade on what was a public holiday for most of the country, but the financial sector managed to finish the day on a high.

At the close of trade, the benchmark S&P/ASX 200 Index was 1.6 points, or 0.04 per cent, higher at 4388.6 points.

Australian Stock Report head of research Geoff Saffer said trading remained subdued throughout the day due to the public holiday in most states and territories.

But he said the financial sector posted gains for the day as the market anticipated the Reserve Bank would cut the cash rate by 25 basis points today.

"The banks all managed to close in positive territory, probably due to the market factoring in a rate cut tomorrow," he said.

ANZ closed 4? higher at $24.79, Commonwealth Bank was 8? up to $55.85, National Australia Bank gained 5? to $25.54 and Westpac was up 9? at $24.94.

US sharemarkets finished lower on Friday, the last trading day of the third quarter, after disappointing business activity and consumer spending reports fuelled concerns about the economy. European stocks also fell due to persistent concerns about Spain, where a decision from ratings agency Moody's is due, which could take the country to junk bond status.

There was little company news given the public holiday across most of the country.

Newcrest Mining shares fell 10? to $29.04 after it said it would vigorously defend itself against four legal challenges that threaten part of its $2 billion plans to build Australia's largest underground mine.

Arrium, formerly OneSteel, shares were up 13.?, or 24.77 per cent, at 68? after it said it had rejected a $1 billion takeover offer from a consortium of Singapore and Korean groups. The approach to the steel maker and miner was made on Friday evening.

BHP Billiton closed 8? higher at $33.12 and Rio Tinto was flat at $53.36.

The spot price of gold in Sydney finished at $US1766.58 an ounce, down $US14.62 from Friday's local close of $US1781.20.

National turnover was 949.5 million securities worth $1.88 billion, with 370 stocks up, 408 down and 320 unchanged.

The dollar fell to a one-week low after the release of weak Chinese manufacturing data and amid continuing concerns about Spanish government debt. At 5pm yesterday, the Aussie was trading at US103.60?, down from US104.56? on Friday. During local trade, it fell as low as US103.26?, its lowest since September 21

IG Markets institutional trader Chris Weston said the Chinese purchasing managers' index was the key reason why the dollar was weak yesterday.

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Frequently Asked Questions about this Article…

How did the ASX 200 perform and why was trading subdued?

The ASX 200 closed mostly flat at 4,388.6 points, up just 1.6 points (0.04%). Trading was subdued because it was a public holiday across most states and territories, which reduced activity even though the financial sector posted gains.

Why did bank shares rise on the ASX despite quiet trading?

Bank shares rose because the market was factoring in an anticipated Reserve Bank cash rate cut of 25 basis points. Investors often view a rate cut as supportive for bank margins and share prices, and the financial sector closed the day in positive territory for that reason.

How did major Australian banks trade that day (ANZ, CBA, NAB, Westpac)?

ANZ closed higher at $24.79, Commonwealth Bank was up to $55.85, National Australia Bank finished at $25.54, and Westpac closed at $24.94. All four banks ended the day in positive territory.

What mining company news moved the market (Newcrest, Arrium, BHP, Rio Tinto)?

Newcrest Mining shares fell after saying it would vigorously defend itself against four legal challenges that threaten part of its $2 billion underground mine plans (shares fell to $29.04). Arrium (formerly OneSteel) shares jumped after rejecting a $1 billion takeover offer. BHP Billiton closed higher at $33.12 and Rio Tinto was flat at $53.36.

How did international markets influence Australian investor sentiment?

US markets finished lower after disappointing business activity and consumer spending reports, while European stocks fell amid persistent concerns about Spain and an upcoming Moody's decision that could affect its credit rating. Those global headwinds weighed on sentiment locally.

What happened to the gold price and what does that mean for investors?

The spot price of gold in Sydney finished at US$1,766.58 an ounce, down US$14.62 from the previous local close. A lower gold price can reflect stronger risk appetite or weaker inflation/commodity demand, and investors should watch whether the move is short‑term or part of a broader trend.

Why did the Australian dollar fall and how low did it go?

The Australian dollar fell to a one‑week low after weak Chinese manufacturing data (the purchasing managers' index) and continuing concerns about Spanish government debt. At 5pm the Aussie was trading around US103.60¢, down from US104.56¢, and it fell as low as US103.26¢ — its lowest since September 21.

What was the market turnover and breadth on the day?

National turnover was 949.5 million securities worth about $1.88 billion. Of listed stocks, 370 were up, 408 were down and 320 were unchanged, reflecting a mixed market amid low overall volume.