Clouds lift in US and confidence grows

Warnings from China's outgoing Premier, Wen Jiabao, that prices in the country's property market were far from "reasonable" provided the week's biggest downer, igniting fears of a slowdown in the world's third-biggest economy.

Large falls in commodity prices only added to concerns, particularly for local resource stocks.

But the local bourse was resilient enough to withstand such fears, and it ended the week higher overall.

For the week, the benchmark S&P/ASX 200 rose 64.2 points, or 1.5 per cent, to 4276.2. The broader All Ords gained 64.2 points, or 1.5 per cent, to 4364.7.

More positive data from the US provided further signs this week of a genuine increase in economic activity, which cheered investors.

The US unemployment rate, which remained at a three-year low of 8.3 per cent in February, was joined by a fall in the number of new Americans claiming jobless benefits. Initial claims fell by 14,000, to a seasonally adjusted 351,000 - a four-year low - according to the US Labour Department, while the four-week moving average for new jobless claims remained steady at 355,750.

The news helped to extend a rally on the US market - the Dow Jones rallied for seven straight days, adding 3.5 per cent - and to strengthen the greenback against the local currency, if momentarily.

"It tells us that the momentum of the US recovery is continuing it's looking like becoming self-sustaining," NAB's chief economist, Rob Henderson, said.

"A big drag on the US job market in the last year or so has been job-shedding at state and local government levels ... but it appears like that's coming to an end. That can only augur well for the [US economic] outlook," he said.

Meanwhile, investors seemed to lack enthusiasm for news that Greece's second bail-out package had finally been settled, and that the European Financial Stability Facility would give the stricken country ?39.4 billion ($50 billion).

After months of angst, when it came time for European officials to shake hands, investors' attention was instead directed at China, with local resource stocks becoming minor casualties of fears about Chinese growth.

BHP Billiton and Rio Tinto fell more than 35? each on the day, but over the week they managed to finish in the black. For the week, Rio shares rose 99? to $65.12, despite the federal government confirming it would reassess an application by the company for a mine expansion near the Great Barrier Reef. BHP closed the week at $34.97, up 26?.

The two companies are waiting as a category 3 cyclone approaches Western Australia's Pilbara region, with landfall expected today.

Meanwhile, Macquarie Group shares rose 15.5?, to $27.53, for the week, despite suffering its second credit rating downgrade in four days: Moody's cut its ratings by one notch yesterday, from A2 to A3, and only three days after rival agency Fitch cut its rating to A- from A.

Fortescue Metals rose 17? to $5.81 after the miner doubled its recent funding effort to $US2 billion ($1.9 billion) to help pay for expansion plans.

Shares in Gunns Ltd were suspended from trading after a billionaire investor pulled out of a major recapitalisation. The woodchipper said it was confident of getting sufficient commitment to enable a vital capital raising to proceed. Its shares last traded at 16?.

GrainCorp rose 79? to $8.89 after the commodities company Glencore International reportedly bid $5.2 billion for the firm's Canadian rival Viterra, sparking speculation a bid may be made for GrainCorp.

Tabcorp was steady at $2.70 after the gaming group said live betting on sports was here to stay but the government needed to do more to regulate it.

Cockatoo Coal was up 1.5?, at 38?, after the South Korean conglomerate SK Group used a share placement to increase its stake in Cockatoo from 5.5 per cent to 40 per cent.

Domino's Pizza rose 30? over the week to $8.70, after the chain said it planned to add 1000 jobs.

Over the week, the banking sector performed better than the general market, up 2.3 per cent, compared to the All Ords which was up 1.5 per cent. The majors all performed well, with Westpac leading the way, up 2.1 per cent for the week, and the Commonwealth Bank gaining 1.8 per cent.

ALL ORDS

AUSTRALIA

4364.7

-2.20 (-0.1%)

HIGH 4373.5

LOW 4354.6

SOURCE: BLOOMBERG