Chinese gain, rate cut hopes lift stocks

THE Australian sharemarket finished at a near six-week high, buoyed by encouraging Chinese manufacturing and expectations of a Reserve Bank of Australia interest rate cut on Tuesday.

By InvestSMART · 4 Dec 2012

By InvestSMART ·
4 Dec 2012

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THE Australian sharemarket finished at a near six-week high, buoyed by encouraging Chinese manufacturing and expectations of a Reserve Bank of Australia interest rate cut on Tuesday.

At the close on Monday, the benchmark S&P/ASX200 index was 25.5 points, or 0.57 per cent, higher at 4531.5, while the broader All Ordinaries index was up 22 points, or 0.49 per cent, at 4540.0.

On the ASX 24, the December share price index futures contract was 28 points higher at 4544, with 24,541 contracts traded.

CommSec analyst Juliette Saly said investors shrugged off weak Australian retail figures and instead bought into local stocks after the release of encouraging data on the weekend that showed the biggest gain in 13 months for Chinese manufacturing activity. "Our market's taken that lead and we've seen some good buying coming through today," Ms Saly said.

Figures released by the Bureau of Statistics showed retail spending was steady in October, below expectations of a 0.4 per cent rise.

The weaker retail figure added to expectations the RBA would cut the cash rate by 0.25 percentage points to 3.00 per cent when its board meets on Tuesday for the last time until February 2013.

"Retail trade figures were disappointing but we've seen the market bounce back from the initial shock," Ms Saly said. "News that we're expecting a rate cut tomorrow will help sentiment."

Among the major retailers, JB Hi-Fi gained 33? to $10.26, Wesfarmers was 40? higher at $35.95 and Woolworths rose 15? to $29.43.

Department store operator David Jones fell 5? to $2.44 and Myer shares fell 4? to $2.13.

Among the big miners, BHP Billiton was up 15? to $34.54, Rio Tinto fell 21? to $58.54 and Fortescue dipped 15? to $3.76.

Among the banks, ANZ jumped 33? to $24.69, Commonwealth Bank surged $1.12 to $60.81, while National Australia Bank was 1? lower at $24.29 and Westpac was 6? higher at $25.56.

Television broadcaster Ten Network shares fell 3? to 33.5?.

National turnover was 1.49 billion securities worth $3.82 billion, with 475 stocks up, 473 down and 351 unchanged. The price of gold in Sydney closed at $US1719.50 per fine ounce, down $US11.35 from $US1730.85 on Friday.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket rise to a near six‑week high?

The market was lifted by stronger-than-expected Chinese manufacturing data — the biggest gain in 13 months — and growing expectations the Reserve Bank of Australia would cut interest rates. Those factors encouraged buying across local stocks and pushed the ASX to near six-week highs.

How did the ASX200 and All Ordinaries perform on the day?

The benchmark S&P/ASX200 closed 25.5 points higher at 4,531.5 (up 0.57%), while the broader All Ordinaries rose 22 points to 4,540.0 (up 0.49%).

What Chinese economic news affected Australian markets and why does it matter for investors?

Weekend data showed Chinese manufacturing had its biggest monthly gain in 13 months. For everyday investors, stronger Chinese manufacturing can boost demand for Australian exports and sentiment for resource and industrial stocks, which in turn supports local share prices.

How were expectations of an RBA rate cut influencing investor sentiment?

A softer Australian retail print and other signs pointed to the RBA potentially cutting the cash rate by 0.25 percentage points to 3.00% at its upcoming meeting. Investors took that as positive for sentiment — cheaper borrowing and a more supportive monetary backdrop can help share prices, especially in rate-sensitive sectors.

Which major retail stocks moved and how might retail results affect investors?

Retailers that rose included JB Hi‑Fi (to $10.26), Wesfarmers (to $35.95) and Woolworths (to $29.43). Department store operators David Jones and Myer fell to $2.44 and $2.13 respectively. Weak retail spending for October likely made investors pick winners (strong performers) and avoid laggards, so monitoring retail sales helps gauge consumer demand and retail stock prospects.

What happened with big miners and the major banks on the day?

Among miners, BHP Billiton rose to $34.54, Rio Tinto fell to $58.54 and Fortescue dipped to $3.76. In the banking sector, ANZ was at $24.69, Commonwealth Bank at $60.81, National Australia Bank at $24.29 and Westpac at $25.56. These moves reflect how commodity sentiment and interest-rate expectations can push resource and bank stocks differently.

What was the trading activity and futures picture on the ASX that day?

The December share price index futures contract was 28 points higher at 4,544 with 24,541 contracts traded. National turnover was 1.49 billion securities worth $3.82 billion, with 475 stocks up, 473 down and 351 unchanged — a balanced market showing broad participation.

Were there any other market indicators investors should note from the report?

Yes — the price of gold in Sydney closed at US$1,719.50 per fine ounce, down US$11.35 from the prior Friday. Also, television broadcaster Ten Network saw its shares fall to around 33.5 (as reported). These secondary indicators can help investors read shifts in commodity markets and media stocks alongside the broader market moves.