Domestic strength encourages buyers

THE sharemarket closed higher yesterday but earlier, strong gains were whittled back on profit-taking as investors took advantage of better performers after a week of extreme volatility on global markets amid European bank worries.

By InvestSMART · 13 Aug 2011

By InvestSMART ·
13 Aug 2011

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The benchmark S&P/ASX 200 index closed up 31.8 points, or 0.77 per cent, at 4172.6, while the broader All Ordinaries index rose 34.4 points, or 0.82 per cent, to 4237.9.

UBS Warburg Australia Equities' executive director, Rob Taubman, said the market reflected investors' confidence in the strength of the local economy. "It's feeling much more stable," he said.

"I think there's been a realisation by funds that the yield and valuations are in pretty attractive territory now," he said.

Mr Taubman said the gains were not expected to last because investors continued a close watch on the direction of offshore markets.

Bell Potter senior adviser Stuart Smith said the market had followed a firm lead from Wall Street. US stocks made another dramatic comeback overnight as markets around the world strengthened against a background of continuing volatility. Local banks were mixed yesterday. National Australia Bank was up 6? at $22.96, Westpac 2? higher at $20.47, Commonwealth Bank 2? lower at $48.56 and ANZ lost 17? to $19.92.

Miners ended the day stronger. BHP Billiton rose 28? to $38.21 while Rio Tinto was up $1.11 at $71.52. Fortescue Metals rose 15? to $5.94 after an appeal by a native-title claimant group against the West Australian government's decision to grant three mining leases to Fortescue Metals was dismissed yesterday.

Shopping-centre owner Westfield was down 1? at $7.55. The company said it was spending $160 million to buy into a retail-development in Milan.

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Frequently Asked Questions about this Article…

How did the Australian sharemarket (ASX 200) perform yesterday?

The sharemarket closed higher: the S&P/ASX 200 rose 31.8 points (0.77%) to 4,172.6 and the All Ordinaries gained 34.4 points (0.82%) to 4,237.9. Earlier strong gains were trimmed by profit‑taking after a week of extreme global volatility and European bank worries.

What reasons did analysts give for the recent confidence in the local economy?

UBS Warburg executive director Rob Taubman said the market reflects growing investor confidence in the strength of the local economy, noting markets are feeling more stable and that yields and valuations look attractive to funds.

Should everyday investors expect the recent market gains to continue?

The article notes caution: Rob Taubman said the gains may not last because investors are keeping a close watch on the direction of offshore markets, so continued volatility abroad could affect local gains.

How did international markets, especially the US, influence local trading?

Bell Potter senior adviser Stuart Smith said local markets followed a firm lead from Wall Street, where US stocks staged a dramatic comeback overnight, helping lift markets globally despite ongoing volatility.

How did major Australian banks trade on the day and what were their prices?

Bank stocks were mixed: National Australia Bank was trading at about $22.96, Westpac around $20.47, Commonwealth Bank near $48.56, and ANZ about $19.92 according to the report.

What happened with mining stocks during the session?

Miners finished stronger: BHP Billiton was reported at $38.21, Rio Tinto at $71.52, and Fortescue Metals at $5.94, driven in part by company‑specific developments cited in the article.

Why did Fortescue Metals shares rise on the day?

Fortescue rose after an appeal by a native‑title claimant group against the Western Australian government's decision to grant three mining leases to Fortescue was dismissed, removing a legal overhang.

What was the update on Westfield and its investment plans?

Westfield was slightly down at about $7.55; the company said it is spending $160 million to buy into a retail development in Milan, a strategic investment noted in the report.