Deals, euro news encourage buyers back

THE sharemarket rallied yesterday after a string of corporate deals, led by a $2.25 billion deal between Whitehaven Coal and Aston Resources, boosted energy and mining stocks.

By InvestSMART · 13 Dec 2011

By InvestSMART ·
13 Dec 2011

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THE sharemarket rallied yesterday after a string of corporate deals, led by a $2.25 billion deal between Whitehaven Coal and Aston Resources, boosted energy and mining stocks.

Investors also welcomed news that Europe's leaders had agreed on the weekend to rein in spending in the troubled euro zone.

The S&P/ASX 200 Index rose 49.8 points, or 1.18 per cent, to 4252.8 winning back two-thirds of Friday's 77.7-point fall. The benchmark has now gained 5.4 per cent in value in the past two weeks.

In the biggest announcement of the day, Whitehaven Coal said it would acquire Aston Resources for $2.25 billion, making it the biggest top-listed coal company in Australia.

The billionaire Nathan Tinkler, Aston's biggest shareholder, gave the deal the go-ahead, agreeing to sell his 32 per cent stake. Aston shares rose 14? to $9.90, or 1.4 per cent, but Whitehaven dropped 8?, or 1.4 per cent, to $5.74.

Industrial and retail congolmerate Wesfarmers dropped 58?, or 1.8 per cent, to $30.90 after amendments to its contracts with BlueScope Steel left it facing a $190 million write-down in its Coregas business.

The big banks performed strongly, led by Commonwealth Bank, which rose 2.03 per cent to $49.83, and NAB, up 1.42 per cent to $24.36.

The market opened strongly and remained buoyant for the whole session, despite official figures for October's trade surplus coming in below economists' expectations.

The $1.6 billion surplus was down $654 million on September, with exports flat and imports rising sharply. Exports are now up 11.6 per cent on the year while imports have risen 17.2 per cent.

Other figures from the Bureau of Statistics showed home-loan approvals rose in October for the seventh straight month, before the Reserve Bank's two 25-basis-point rate cuts.

But with loans for the construction of homes falling by 1.8 per cent the fourth fall in five months economists said it was bad news for builders.

"Presumably home building will get a lift from the recent rate cut," Commonwealth Bank chief economist Craig James said in a note.

"But the current data is hardly positive for the home building industry," he said. "Population is rising but we aren't adding to the housing stock, suggesting that established home prices will soon flatten and then start edging higher again."

The dollar put on half a US cent to finish the day on $US1.0169.

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Frequently Asked Questions about this Article…

What drove the recent ASX sharemarket rally and how much did the S&P/ASX 200 rise?

The market rally was driven by a string of corporate deals — notably Whitehaven Coal’s takeover of Aston Resources — and positive sentiment after European leaders agreed to rein in euro‑zone spending. The S&P/ASX 200 rose 49.8 points, or 1.18%, to 4,252.8, recovering around two‑thirds of the previous session’s fall and bringing a 5.4% gain over the past two weeks.

What are the details of Whitehaven Coal's acquisition of Aston Resources and how did the stocks move?

Whitehaven Coal agreed to acquire Aston Resources for about $2.25 billion, which would make it one of Australia’s largest top‑listed coal companies. Aston’s biggest shareholder, Nathan Tinkler, agreed to sell his 32% stake. On the day, Aston shares rose to $9.90 (around a 1.4% gain) while Whitehaven’s shares fell to $5.74 (about a 1.4% decline).

How did major Australian banks perform during the rally — what happened to Commonwealth Bank and NAB shares?

The big banks performed strongly on the day. Commonwealth Bank shares rose about 2.03% to $49.83, and National Australia Bank (NAB) rose about 1.42% to $24.36, helping to support the broader market rally.

Why did Wesfarmers shares fall and what impact did BlueScope contract changes have?

Wesfarmers fell after amendments to its contracts with BlueScope Steel left it facing a roughly $190 million write‑down in its Coregas business. The company’s shares dropped about 1.8% to $30.90 on the news.

What did October’s trade figures show and why were they important for investors?

Australia’s October trade surplus came in at $1.6 billion, down $654 million from September and below economists’ expectations. Exports were essentially flat while imports rose sharply — exports are up 11.6% year‑on‑year and imports up 17.2% — a combination that trimmed the surplus and caught investors’ attention.

What do the home‑loan approval and housing construction numbers mean for the housing market?

Home‑loan approvals rose in October for the seventh straight month (measured before the Reserve Bank’s two 25‑basis‑point rate cuts), but loans for home construction fell 1.8% — the fourth decline in five months. Commonwealth Bank chief economist Craig James noted the recent rate cuts may lift home building, but the current data is not positive for builders; with population rising but little new housing stock being added, established home prices may flatten then edge higher.

How did developments in Europe affect Australian investor sentiment and stock buying?

Investors welcomed news that European leaders had agreed to rein in spending in the troubled euro zone. That improvement in global risk sentiment encouraged buyers back into the market and helped underpin gains in energy, mining and broader ASX stocks.

What happened to the Australian dollar during the session?

The Australian dollar gained about half a US cent on the day, finishing at roughly US$1.0169.