THE sharemarket snapped a three-day losing streak yesterday after the Chinese central bank's announcement of a cash injection into money markets helped push resource stocks up.
The market had been tracking about 0.6 per cent lower during the day until news came out around midday that the People's Bank of China would pump 365 billion yuan ($A56 billion) into money markets to maintain banks' liquidity.
The benchmark S&P/ASX 200 rose 22.6 points, or 0.5 per cent, to 4384.2.
Goldminers led the charge, adding 1.3 per cent, while materials and health jumped 1.1 per cent. CSL was the star of the healthcare sector, hitting a record high of $45.98.
Financial stocks finished 0.5 per cent higher and energy rose 0.3 per cent. Consumer discretionary and consumer staples bucked the trend, falling 0.3 and 0.2 per cent respectively.
China's capital injection helped investors shrug off news of a fresh breakout of European debt fears, after eurozone creditors made it known that Spain's banks would be burdened with higher debts if a planned ?100 billion bailout went ahead.
Spanish 10-year bond yields pushed back above 6 per cent overnight, wiping 2.7 per cent in value from Europe's equity market.
St George economist Janu Chan said Spanish Prime Minister Mariano Rajoy faced growing pressure to ask for a bailout from European authorities, particularly as Spanish anti-austerity protests intensified.
"Concerns about the situation in Spain have driven 10-year bond yields above 6 per cent, rising 32 basis points, further placing pressure on Spain to ask for a bailout," Ms Chan said.
"There's a lot of anger from the public about the austerity measures that have been put in place."
After the news from China, Australia's largest company, BHP Billiton, rose 21?, or 0.64 per cent, to $33.02. It represents more than one-fifth of resources stocks by market capitalisation and helped drag the market up.
Fellow resources stocks also improved, with Rio Tinto up 70? at $53.59, and Fortescue Metals 1? higher at $3.52.
Echo Entertainment rose 4? to $3.79 after the group denied it was in turmoil when chief executive Larry Mullin quit, amid concerns about the casino operator's balance sheet.
Metcash slipped 8? to $3.57, after the grocery wholesaler said it expected to name a new chief executive in February, with Andrew Reitzer confirming he will resign at the end of June next year but will remain as a consultant for three years.
Woolworths dropped 27? to $29.01 after it announced the sale of its Dick Smith Electronics chain to a private equity firm for $20 million.
Frequently Asked Questions about this Article…
Why did the S&P/ASX 200 rise yesterday and what drove the market turnaround?
The S&P/ASX 200 rose 22.6 points (about 0.5%) to 4,384.2 after the People’s Bank of China announced a large cash injection into money markets. That midday news improved liquidity sentiment and helped lift resource stocks, reversing an earlier drop of about 0.6% during the day.
What exactly did the People’s Bank of China (PBoC) do and how big was the injection?
The PBoC said it would pump 365 billion yuan (about A$56 billion) into money markets to maintain bank liquidity. The announcement boosted investor confidence in resources and helped offset fears from European debt developments.
Which sectors led gains on the ASX, and which sectors fell?
Goldminers led the gains, up about 1.3%, while materials and health both jumped roughly 1.1%. Financial stocks finished 0.5% higher and energy rose 0.3%. By contrast, consumer discretionary and consumer staples fell about 0.3% and 0.2% respectively.
How did major resources stocks like BHP Billiton, Rio Tinto and Fortescue perform?
BHP Billiton helped lift the market, rising to $33.02 (about 0.64%). Rio Tinto’s shares moved to $53.59 and Fortescue Metals was trading at $3.52 — all three resources names improved after the Chinese liquidity news.
What happened with CSL and why was it notable?
CSL was the standout in the healthcare sector, hitting a record high of $45.98 during the session, contributing to the sector’s 1.1% rise.
How did European debt worries affect markets, especially Spain’s situation?
European debt fears resurfaced after eurozone creditors signalled Spain’s banks could face bigger debts if a planned €100 billion bailout proceeded. Spanish 10-year bond yields pushed back above 6%, and European equities fell, losing about 2.7% in value overnight. Despite that, China’s liquidity move helped Australian investors look past some of these concerns.
What corporate news affected individual stocks like Echo Entertainment and Metcash?
Echo Entertainment rose to $3.79 after the group denied it was in turmoil following the resignation of chief executive Larry Mullin. Metcash slipped to $3.57 after announcing its CEO Andrew Reitzer will resign at the end of June next year but will remain as a consultant for three years; the company said it expects to name a new chief executive in February.
What was the update on Woolworths and the Dick Smith sale mentioned in the article?
Woolworths dropped to $29.01 after announcing the sale of its Dick Smith Electronics chain to a private equity firm for $20 million, a move that weighed on the retailer’s share price during the session.
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