Hopes of European bank rescue bolsters market

THE sharemarket bounced back from Monday's heavy losses as speculation that China was seeking to buy into ailing European banks bolstered shares on Wall Street.

By InvestSMART · 14 Sep 2011

By InvestSMART ·
14 Sep 2011

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THE sharemarket bounced back from Monday's heavy losses as speculation that China was seeking to buy into ailing European banks bolstered shares on Wall Street.

The local bourse was up more than 1 per cent in early trade following a late rally in US stocks triggered by a report about Chinese moves to purchase Italian bonds.

The benchmark S&P/ASX200 index eased back to close 34.2 points, or 0.85 per cent, higher at 4,072.7, while the broader All Ordinaries added 33.3 points, or 0.81 per cent, to 4,158.4. Trading volumes were slightly below average, with turnover of 2.05 billion stocks worth $4.66 billion.

"There's not a huge amount of conviction," said CMC Markets strategist Michael McCarthy.

He said investors were cautiously optimistic about the talks with Italian authorities.

"One of the suggestions that keeps coming up is that there may be appetite from Chinese investment houses to take stakes in European banks," Mr McCarthy said.

As for the impact on the local market, the best performers were energy stocks, with the sector up about 2.8 per cent towards the close, compared to Monday's fall of 5 per cent.

Origin Energy rose 49?, or 3.92 per cent to $13, Oil Search was up 21?, or 3.6 per cent, at $6.05, Santos rose 30? to $11.21 and Woodside gained 57? to $33.14.

The best performing stock on the S&P/ASX100 index was engineering firm WorleyParsons, which provides services to the energy sector. Its shares rose $1.18, or 4.8 per cent, at $25.70.

The worst performer was mineral sands miner Iluka, which fell 47?, or nearly 3 per cent, to $15.26.

Market heavyweight BHP Billiton finished up 84? at $37.29, while fellow mining giant Rio Tinto rose 70? to $68.90.

Construction firm Leighton rose 33? to $18.15 after being awarded a $US300 million road building contract in Oman.

Westfield Group, which is soon to open the doors on its $2.1 billion Stratford City shopping centre in east London, fell 11? to $7.42. The complex will be the largest urban shopping centre in Europe.

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Frequently Asked Questions about this Article…

Why did the sharemarket bounce back and what role did speculation about European bank rescue play?

The market rebound was driven by speculation that China might buy into ailing European banks and reports China was looking to purchase Italian bonds. That late rally in US stocks helped lift local markets, with analysts saying investors were cautiously optimistic about talks with Italian authorities.

How did the S&P/ASX200 and All Ordinaries close on the day covered by the article?

The benchmark S&P/ASX200 closed up 34.2 points (0.85%) at 4,072.7. The broader All Ordinaries added 33.3 points (0.81%) to finish at 4,158.4.

Which sector led gains on the ASX and by how much did it rise?

Energy stocks led the market, with the energy sector up about 2.8% toward the close. This followed a sharp fall in the sector the previous day.

Which major energy companies moved significantly and what were their share prices?

Several energy names rose during the session: Origin Energy traded at $13, Oil Search at $6.05, Santos at $11.21 and Woodside at $33.14, reflecting the sector-wide lift reported in the article.

What were the biggest individual winner and loser on the S&P/ASX100 mentioned in the article?

Engineering firm WorleyParsons was the best performer on the S&P/ASX100, gaining $1.18 (4.8%) to $25.70. The worst performer named was mineral sands miner Iluka, which fell nearly 3% to $15.26.

What was the trading activity like — volumes and turnover — on the day?

Trading volumes were slightly below average, with turnover reported at 2.05 billion shares worth about $4.66 billion.

Did company-specific news move any stocks, such as Leighton or Westfield?

Yes. Construction firm Leighton rose to $18.15 after being awarded a US$300 million road-building contract in Oman. Westfield Group fell to $7.42 as it prepared to open its $2.1 billion Stratford City shopping centre in east London.

What should everyday investors note about the market reaction to the European bank rescue speculation?

The article highlights that the rally was driven by speculation rather than definitive policy action — analysts described sentiment as 'cautiously optimistic' but noted limited conviction. Everyday investors may want to monitor official developments on any Chinese investment moves and Italian or European bank rescue plans before assuming the rally is sustained.