BARGAIN-HUNTING investors dragged the sharemarket into the black yesterday, ending a week of heavy losses. Stocks completed a dramatic turnaround following a steep fall at the beginning of the session.
The S&P/ASX 200 Index finished up 48.7 points, or 1.2 per cent, at 4034.8, after dropping more than 5 per cent in early trading.
CMC Markets chief analyst Ric Spooner said buyers waiting on the sidelines had moved in after a nervous start to trading. He expected the market would stage a slow recovery within a year. "The most likely outcome is we are in for a long period of relatively weak economic conditions around the world," he said. "We will see a reasonable recovery from here [but] I think it's going to be choppy."
Equity Trustees' head of asset management, Shaun Manuell, expected companies would be releasing cautious outlook statements.
"No one's going to put their head too far above the parapet and suggest they're going to have a stellar year because there's just too much nervousness out there," he said.
Mr Manuell said Australia's economic foundations were sound, with growth expected next year and unemployment now at low levels.
He said investor nerves had forced the market down in the past week.
"We could be talking ourselves into a recession because of all the fear that's being spouted," Mr Manuell said. "The underlying fundamentals aren't too bad. They certainly don't correspond with the moves we've seen in the last week."
Australian School of Business associate professor Jerry Parwada said the market had been gripped by fears of global economic fallout.
He said a downgrade in the US credit rating and concerns about economic instability in Europe had rocked investors' confidence.
"Uncertainty is stalking the market, even though there isn't a logical reason for the markets to melt down," Professor Parwada said.
The big four banks rose and the financial sector led yesterday's gains, up 2.2 per cent. Commonwealth gained $1.66 to $47.28, ANZ moved up 51? to $19.01 and Westpac advanced 42? to $19.26.
NAB reported it was on track to deliver an annual profit higher than $5.5 billion. It finished up 60?, or 2.9 per cent, at $21.50.
The energy index increased by 1.8 per cent and the materials sector picked up 1.1 per cent. Index heavyweight BHP Billiton was down 45?, or 1.2 per cent, at $37.05. Rio Tinto advanced $1.11, or 1.6 per cent, to $69.74.
Frequently Asked Questions about this Article…
What happened to the S&P/ASX 200 in the latest trading session?
The S&P/ASX 200 finished up 48.7 points, or 1.2%, at 4,034.8 after an early sell-off that saw the index drop more than 5% in morning trade. Bargain-hunting buyers moved in later and pushed the market back into the black.
Who were the "bargain-hunting" investors and why did they drive the market higher?
According to CMC Markets chief analyst Ric Spooner, buyers who had been waiting on the sidelines stepped in after a nervous start to trading — buying stocks after the sharp early fall. That bargain-hunting demand helped reverse losses and lift the market.
What are analysts saying about the prospects for a market recovery?
Analysts were cautious: Ric Spooner said he expects a slow recovery within a year and that markets will likely be choppy amid a long period of relatively weak global conditions. Equity Trustees' Shaun Manuell said companies will likely give cautious outlooks even though Australia’s economic foundations remain sound.
How did the big four banks and the financial sector perform?
The financial sector led gains, rising about 2.2%. Commonwealth Bank gained $1.66 to $47.28. ANZ moved up to $19.01 and Westpac advanced to $19.26. NAB finished up 2.9% at $21.50 and reported it is on track to deliver an annual profit higher than $5.5 billion.
How did energy and materials stocks fare, and what happened with BHP Billiton and Rio Tinto?
The energy index rose 1.8% and the materials sector picked up 1.1%. Index heavyweight BHP Billiton fell 1.2% to $37.05, while Rio Tinto advanced $1.11, or about 1.6%, to $69.74.
Did any company provide profit guidance or notable corporate updates?
Yes. NAB reported it was on track to deliver an annual profit higher than $5.5 billion, and its share price finished up 2.9% at $21.50.
Are companies likely to give upbeat forecasts after the recent market volatility?
Shaun Manuell said companies are likely to issue cautious outlook statements because there’s too much nervousness in the market for firms to claim they will have a stellar year. Expect conservative guidance in the near term.
What are the main sources of market uncertainty mentioned in the article?
The article cites fears of global economic fallout — including a downgrade in the US credit rating and concerns about economic instability in Europe — as reasons investor confidence has been shaken. Professor Jerry Parwada noted uncertainty is "stalking the market" despite no clear logical reason for a full meltdown.
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