Higher commodity prices, offshore rally bolster market

'Reports suggest Berlusconi is on his way out and markets seem to have taken kindly to that news.' Stan Shamu, IG Markets

By InvestSMART · 10 Nov 2011

By InvestSMART ·
10 Nov 2011

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THE local market gained more than 1per cent yesterday as stronger commodity prices prompted buying of mining stocks.

The benchmark S&P/ASX 200 index was up 52.3 points, or 1.22 per cent, at 4346.1, while the broader All Ordinaries index was up 49.4 points, or 1.14 per cent, at 4406.2.

The December share price index futures contract closed 60 points higher at 4340, with 30,477 contracts traded.

The materials sector led local gains after Wall Street and stronger metals prices provided a boost to the market. Stocks on Wall Street rose after the Italian Prime Minister, Silvio Berlusconi, said he would resign once a budget was passed.

Italy has become a key focus for investors this week, with Mr Berlusconi seen as an obstacle to sweeping economic reforms needed to help the country cut its massive debt load and avoid sinking into a financial crisis.

An IG Markets analyst, Stan Shamu, said the Australian market opened strongly, due to the positive lead from offshore.

"Reports suggest Berlusconi is on his way out and markets seem to have taken kindly to that news," Mr Shamu said.

The materials sector led the broader market, rising 1.7 per cent.

BHP Billiton shares were up 58?, or 1.5 per cent, at $38.33, while Rio Tinto rose 98? to $70.75.

Fortescue Metals was 8? higher at $5.10. An Aboriginal corporation was denied the chance to speak at Fortescue's annual general meeting yesterday.

Myer shares were among the best performers as the consumer discretionary sector posted solid gains. Myer rose 15?, or 6.4 per cent, to $2.48 after it reiterated its guidance for flat sales for the full year.

Other retailers were also higher, with David Jones up 15? at $3.29 and Harvey Norman 7? higher at $2.19.

In other news, resources and media company Seven Group Holdings expects its first-half profit to be higher than for the same period last year. The shares rose 20?, or 2.64 per cent, to $7.78.

National turnover was 1.84 billion securities worth $4.62 billion.

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Frequently Asked Questions about this Article…

What drove the Australian market to gain more than 1% yesterday?

The article says stronger commodity and metals prices sparked buying of mining stocks and, coupled with a positive lead from Wall Street, pushed the local market higher. Offshore political news — reports that Italy's Silvio Berlusconi would resign once a budget passed — also helped lift sentiment, according to IG Markets analyst Stan Shamu.

How did the S&P/ASX 200 and All Ordinaries indexes perform?

The S&P/ASX 200 rose 52.3 points, or 1.22%, to 4,346.1, while the broader All Ordinaries climbed 49.4 points, or 1.14%, to 4,406.2, according to the article.

Which sector led gains on the ASX and why is that important for investors?

The materials sector led the market, rising 1.7%, driven by stronger metals prices and a positive offshore lead. For everyday investors, that highlights how commodity price moves and global news can quickly affect resource-focused stocks and sector performance on the ASX.

How did major miners like BHP Billiton, Rio Tinto and Fortescue Metals perform?

BHP Billiton shares were up 1.5% to $38.33. Rio Tinto rose to $70.75, and Fortescue Metals was trading at $5.10. The article links these gains to stronger metals prices and renewed buying interest in mining stocks.

What happened with consumer and retail stocks such as Myer, David Jones and Harvey Norman?

Myer was among the best performers after reiterating guidance for flat full-year sales — its shares rose 6.4% to $2.48. Other retailers were also higher, with David Jones at $3.29 and Harvey Norman at $2.19, reflecting broad gains in the consumer discretionary sector.

Did any other companies report notable news that affected their shares?

Yes. Seven Group Holdings said it expects first-half profit to be higher than the same period last year; its shares rose 2.64% to $7.78, according to the article.

What was happening in the futures market and overall market turnover?

The December share price index futures contract closed 60 points higher at 4,340, with 30,477 contracts traded. National turnover was 1.84 billion securities worth $4.62 billion, as reported in the article.

What should everyday investors take away from this market update?

The article suggests that commodity prices and offshore developments can have a big impact on Australian markets, especially the materials sector and major miners. For everyday investors, it’s a reminder to watch commodity trends, sector news, corporate updates (like profit guidance), and major global political events that can influence sentiment on the ASX.