European debt deal perks up shares

THE sharemarket closed more than 1 per cent higher, bolstered by a new deal in Europe to manage the sovereign debt crisis.

By InvestSMART · 23 Jul 2011

By InvestSMART ·
23 Jul 2011

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THE sharemarket closed more than 1 per cent higher, bolstered by a new deal in Europe to manage the sovereign debt crisis.

The S&P/ASX 200 index ended the trading session 46.9 points up at 4602.9, while the All Ordinaries index rose 47.9 points to 4674.1.

An RBS Morgans private client adviser, Bill Bishop, said the market was lifted by news that euro zone leaders had stitched up a deal to support debt-riddled member states.

The leaders of 17 European countries and the International Monetary Fund have agreed to give Greece a second bailout worth ?109 billion ($145 billion), on top of the ?110 billion already granted a year ago.

National Australia Bank was the biggest mover, up 62?, or 2.52 per cent, at $25.22. Commonwealth Bank was up 78?, or 1.57 per cent, at $50.52, following the appointment of Ian Narev as its new chief executive to replace Ralph Norris. ANZ rose 47?, or 2.21 per cent, to $21.73, and e Westpac rose 46?, or 2.18 per cent, to $21.60.

BHP Billiton fell 15? to $43.43. The spot price of gold in Sydney closed at $US1588.10 per fine ounce, down $US16.50 from Thursday's close of $US1604.60. Gold miner Newcrest's shares were 58 cents lower at $40.02.

Wesfarmers rose 37?, or 1.2 per cent, to $31.21, while Woolworths rose 21?, or 0.76 per cent, to $27.84, after the Australian Competition and Consumer Commission cleared it of predatory pricing for selling its house-brand milk at a discount.

News Corp stocks fell after James Murdoch was accused of misleading British MPs over how much he knew of phone hacking at News of the World. News shares were down 28?, or 1.81 per cent, at $15.20.

Shares in Austar United Communications plummeted after the competition watchdog said Foxtel's takeover bid for it could substantially lessen competition. Austar shares finished down 21?, or 16.22 per cent lower, at $1.085.

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Frequently Asked Questions about this Article…

What drove the Australian sharemarket higher today and why should everyday investors notice?

The market rose after euro zone leaders and the IMF agreed a new deal to support debt‑ridden member states, including a second bailout for Greece. RBS Morgans adviser Bill Bishop said that news helped lift investor sentiment and pushed Australian shares up more than 1%.

How did the main Australian indices perform – what were the S&P/ASX 200 and All Ordinaries closing levels?

The S&P/ASX 200 closed 46.9 points higher at 4602.9, while the All Ordinaries rose 47.9 points to finish at 4674.1, reflecting the positive market reaction to the European debt deal.

Which bank shares led the gains and were there any company-specific reasons?

Major banks were among the top movers: National Australia Bank was the biggest mover (closing at $25.22), Commonwealth Bank rose after appointing Ian Narev as new CEO (closing at $50.52), ANZ and Westpac also closed higher. The sector benefited from the improved market sentiment driven by the European debt agreement and the CBA leadership news.

What happened to mining and gold stocks during the session?

BHP Billiton closed lower at $43.43. Gold prices in Sydney fell — the spot gold price closed at US$1,588.10 per fine ounce, down US$16.50 from the previous close — and Newcrest shares were 58 cents lower at $40.02.

How did retail stocks like Wesfarmers and Woolworths react to the market news?

Wesfarmers rose to $31.21 and Woolworths gained to $27.84. Woolworths’s share rise came after the Australian Competition and Consumer Commission cleared it of predatory pricing over discounted house‑brand milk, which helped its stock on the day.

Why did News Corp shares fall and what issue affected investor sentiment?

News Corp shares fell after reports that James Murdoch was accused of misleading British MPs about what he knew regarding phone hacking at the News of the World. News shares closed at $15.20 following that negative publicity.

What caused Austar United Communications shares to plummet and how did the competition watchdog influence the move?

Austar shares plunged after the competition watchdog said Foxtel’s takeover bid could substantially lessen competition. Austar finished the session down, closing at $1.085, as investors reacted to the regulator’s concerns.

What exactly did the European leaders and the IMF agree to regarding Greece, and how did that affect markets?

Leaders from 17 European countries and the IMF agreed to provide Greece with a second bailout worth €109 billion (on top of about €110 billion granted previously). That package reassured markets and helped lift share prices in Australia by easing worries about the sovereign debt crisis.