Confidence flows back into market

THE sharemarket enjoyed its best week in more than a year as money flowed back into stocks on confidence European banks will be strengthened against a Greek default.

By InvestSMART · 8 Oct 2011

By InvestSMART ·
8 Oct 2011

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THE sharemarket enjoyed its best week in more than a year as money flowed back into stocks on confidence European banks will be strengthened against a Greek default.

The local bourse ended in the black for the third straight day on Friday, with the benchmark S&P/ASX200 index up 93 points, or 2.3 per cent, at 4162.9, and the broader All Ordinaries rising 92.9 points, or 2.25 per cent, to 4,225.

CMC Markets head of analysis David Land said the third day of strong buying inspired confidence but the market was still vulnerable to changes in Europe, amid highly volatile conditions.

"When you consider what the futures looked like in the morning, the gain [yesterday] has exceeded all expectation and sees caution being thrown to the wind," he said.

Energy stocks led the gains as oil prices rose again overnight. Woodside Petroleum rose 2.2 per cent, or 74?, to $35.08, while Santos finished up 3.6 per cent, or 42?, at $12.02.

Among the miners, BHP Billiton advanced 2.5 per cent to $37.20, while fellow miner Rio Tinto gained $3.12, or 4.9 per cent, to $66.40.

Financials, which led the US market higher overnight, were also strong, with all the major banks gaining ground. National Australia Bank closed the strongest, up 89?, or 3.9 per cent, to $23.76.

Investment bank Macquarie Group was among the best performers, rising $1.52, or 6.7 per cent, to $24.06.

Transfield Services rose 14?, or 6.9 per cent, to $2.16 after announcing a share buyback this week.

Qantas shares rose 5?, or 3.5 per cent, to $1.50 after resolving some of it industrial relations problems.

IT company CSG rose 7 per cent to $1.13 after announcing it had received a new approach following a $340 million offer from an unnamed bidder last week.

ALL ORDS

4225.0

AUSTRALIA

92.90 (2.2%)

HIGH 4242.4

LOW 4132.1

SOURCE: BLOOMBERG

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket have its best week in more than a year and how did the ASX200 and All Ordinaries perform?

The market rally was driven by money flowing back into stocks on renewed confidence that European banks would be strengthened against a possible Greek default. The S&P/ASX200 rose 93 points (about 2.3%) to 4,162.9, and the All Ordinaries climbed 92.9 points (about 2.25%) to 4,225 — marking the third straight day in the black.

What was behind the return of investor confidence in Australian shares?

Investor confidence picked up because markets expected support for European banks amid Greek default concerns, and positive momentum from overnight US financials. Analysts noted strong buying over several days, although they warned the market remained vulnerable to changes in Europe and could be volatile.

Which sectors led the gains on the ASX during the rally?

Energy stocks led the gains as oil prices rose overnight. Miners and financials also performed strongly, with a broad lift across major resource and bank names contributing to the overall market advance.

How did major energy companies like Woodside Petroleum and Santos perform in the rally?

Woodside Petroleum rose about 2.2% to $35.08, while Santos finished up roughly 3.6% to $12.02, reflecting the sector-wide benefit from higher oil prices.

How did big mining stocks such as BHP Billiton and Rio Tinto move during the market upswing?

BHP Billiton advanced about 2.5% to $37.20, and Rio Tinto gained around 4.9%, rising $3.12 to $66.40, helping push the market higher.

What happened with the major banks and financial stocks on the day of the rally?

Financials were strong following gains in US banks. National Australia Bank was the strongest of the big banks, up about 3.9% to $23.76, and Macquarie Group was among the best performers, rising $1.52 (around 6.7%) to $24.06.

Were there any company-specific corporate actions or news that drove share price moves?

Yes. Transfield Services jumped after announcing a share buyback, finishing higher at $2.16. IT firm CSG rose about 7% to $1.13 after saying it had received a new approach following a $340 million offer from an unnamed bidder the prior week. Qantas shares also rose—about 3.5% to $1.50—after resolving some industrial relations issues.

Does the article suggest the rally is sustainable or are there risks investors should watch?

The article quotes CMC Markets' head of analysis David Land who said the strong buying inspired confidence but the market remained vulnerable to European developments and highly volatile conditions. So while the rally was positive, investors were advised to remain cautious given ongoing geopolitical and market risks.