Big bank gains help arrest the slide

THE sharemarket recovered from seven-week lows to close modestly higher on Wednesday. But investors remain anxious about developments in Europe and the US.

By InvestSMART · 15 Nov 2012

By InvestSMART ·
15 Nov 2012

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THE sharemarket recovered from seven-week lows to close modestly higher on Wednesday. But investors remain anxious about developments in Europe and the US.

The S&P/ASX 200 Index rose 8.6 points, or 0.2 per cent, to 4388.4, while the broader All Ordinaries gained 6.5 points to 4410.7.

Financials gained 0.6 per cent and telecoms added 0.4 per cent, while goldminers fell 1.2 per cent, energy dropped 0.6 per cent and materials shed 0.3 per cent.

Better-than-expected earnings results in the US coupled with receding fears that Greece is close to defaulting on its debt helped maintain a cautious optimism, as investors look for the market to break out of its downward trend.

Banks did most of the heavy lifting with the big four all posting gains. Commonwealth Bank added 0.7 per cent to $59.09, ANZ jumped 0.6 per cent to $24.20, NAB rose 0.6 per cent to $23.24 and Westpac pushed up 0.2 per cent to $24.85.

Among the miners, Rio Tinto was up 0.3 per cent to $57.85, while rival BHP fell 0.1 per cent to $33.73. Iron ore miner Fortescue jumped 0.8 per cent to $4.

Consumer confidence surged to a 19-month high, with households reacting positively to the Reserve Bank's recent rate cuts, according to a Westpac and Melbourne Institute survey.

As a result, retail stocks enjoyed a small boost, with department store David Jones adding 0.8 per cent to $2.46 while rival Myer gained 0.3 per cent to $2. Harvey Norman was flat at $1.81 and JB Hi-Fi jumped 0.8 per cent to $10.18.

"Everyone is quietly hoping this is going to be the good news that takes us into Christmas. However, I wouldn't put my money on it," said Janine Cox, a Wealth Within analyst.

Webjet shares were hammered after it warned of "very low growth levels" in the travel sector in recent months, despite issuing guidance of at least 10 per cent increase in profit after tax for this financial year. Shares in the online travel retailer fell 15 per cent to $3.51.

"Stocks like [Webjet] really get slammed in a market like this. They've been so good, the stock has been really solid and they've been trending up nicely. Their strategy has been an open one [but] in this climate, the market can be quite brutal," Ms Cox said.

Media shares performed well, with Fairfax Media up 4 per cent to 39.5? after its sold its portfolio of US rural magazines.

Seven West Media jumped 2.3 per cent to $1.32, Ten Network rose 1.8 per cent to 28?, APN added 1.6 per cent to 32? and News Corp nudged up 0.3 per cent to $23.60.

The Australian dollar was up half a cent on improved consumer sentiment and weakness in the greenback. Late on Wednesday, the dollar was trading at US104.52?.

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Frequently Asked Questions about this Article…

What happened to the ASX on Wednesday and why did the market recover from seven-week lows?

The sharemarket recovered from seven-week lows and closed modestly higher: the S&P/ASX 200 rose 8.6 points (0.2%) to 4,388.4 and the All Ordinaries gained 6.5 points to 4,410.7. The bounce was driven by better-than-expected US earnings and reduced fears that Greece was close to defaulting on its debt, which helped restore cautious optimism among investors.

How did the big four banks perform and why did they matter for the market rally?

Banks did most of the heavy lifting for the rally — the big four all posted gains. Commonwealth Bank added 0.7% to $59.09, ANZ jumped 0.6% to $24.20, NAB rose 0.6% to $23.24 and Westpac pushed up 0.2% to $24.85. Their coordinated strength helped lift the financial sector and the broader ASX benchmarks on the day.

What was the performance of major mining stocks like Rio Tinto, BHP and Fortescue?

Mining results were mixed: Rio Tinto was up 0.3% to $57.85, BHP slipped 0.1% to $33.73 and iron ore miner Fortescue jumped 0.8% to $4. Overall, materials shed 0.3% while goldminers fell 1.2% and energy dropped 0.6% on the session.

Why did retail and consumer stocks get a lift and which retailers moved?

Consumer confidence surged to a 19‑month high in a Westpac–Melbourne Institute survey, with households reacting positively to recent Reserve Bank rate cuts. That lifted retail names: David Jones rose 0.8% to $2.46, Myer gained 0.3% to $2.00, Harvey Norman was flat at $1.81 and JB Hi‑Fi jumped 0.8% to $10.18.

Why did Webjet shares fall so sharply and what guidance did the company give?

Webjet shares were hammered after the online travel retailer warned of 'very low growth levels' in the travel sector in recent months. This came despite the company issuing guidance for at least a 10% increase in profit after tax for the financial year; the stock fell 15% to $3.51.

How did media stocks perform and what news helped Fairfax Media in particular?

Media shares performed well overall. Fairfax Media rose about 4% to around 39.5 after selling its portfolio of US rural magazines. Other gains included Seven West Media (up 2.3% to $1.32), Ten Network (up 1.8%), APN (up 1.6%) and News Corp, which nudged up 0.3% to $23.60.

What broader economic or global factors were influencing investor sentiment in this report?

Investor sentiment was shaped by improved US corporate earnings and easing concerns about a Greek debt default, producing cautious optimism that could help the market break its downward trend. At the same time, some analysts remained guarded — noting hopes for positive momentum into the holiday season but stopping short of strong conviction.

How did the Australian dollar move and what drove that change?

The Australian dollar rose about half a cent on the day, helped by improved consumer sentiment and weakness in the US dollar. Late on Wednesday it was trading near US104.52.