Housing troubles but market still up

THE sharemarket closed higher yesterday, despite a worrying slump in new home sales, as investors prepared for an important speech by the US Federal Reserve chairman on Friday.

By InvestSMART · 29 Aug 2012

By InvestSMART ·
29 Aug 2012

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THE sharemarket closed higher yesterday, despite a worrying slump in new home sales, as investors prepared for an important speech by the US Federal Reserve chairman on Friday.

Every sector made gains, except resource and energy stocks, as the last week of the profit-reporting season rolled on. The benchmark S&P/ASX 200 Index rose 15.7 points, or 0.4 per cent, to 4359.4.

Analysts said investors appeared to be waiting for the Federal Reserve's annual conference. Last year, Fed chairman Ben Bernanke used the event to foreshadow a second round of bond buying.

Figures showed new home sales for July fell 5.6 per cent. It was the first decline in four months, coming after a 2.8 per cent rise in June, but the decline was big enough to wipe out all the gains since April.

It was the second-lowest monthly total of new home sales in 11 years, according to the Housing Industry Association. Economists said the figures suggested demand was more tenuous than people thought, with persistent weakness in the detached-home market.

"We would have expected a decline in Victorian sales after the ending in June of the state first-home bonus, and that indeed occurred," NAB senior economist David de Garis said. "But that fall was in fact eclipsed by larger detached-home-sale declines in all but one of the other states."

Aristocrat Leisure rose 19? to $2.76 after the gaming machine supplier reported a better than expected 40 per cent rise in first-half net profit to $34.7 million.

Flight Centre climbed 10? to $23.70 after reporting a 43 per cent boost to full-year profit.

GrainCorp was put in a trading halt and last traded at $9.85 after troubled food group Goodman Fielder sold its oils business Integro for $170 million to a consortium comprising GrainCorp and Gardner Smith.

Lend Lease rose 9? to $8.20 after the federal Skills Minister Chris Evans said more than 100,000 jobs and training for 500 apprentices and thousands of other workers would spin off from Sydney's Barangaroo development.

Seven Group Holdings climbed 45? to $8.05 after the media and earthmoving machinery company more than doubled full-year profit, but said it remained cautious about China's growth and Australia's media industry.

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Frequently Asked Questions about this Article…

How did the Australian sharemarket perform in the latest session and what drove the move?

The S&P/ASX 200 rose 15.7 points (about 0.4%) to 4,359.4. Most sectors gained except resource and energy stocks. Investors were also waiting for an important speech by the US Federal Reserve chairman and the last week of the profit‑reporting season helped support the market.

What did the July new home sales data show and why should everyday investors care?

New home sales fell 5.6% in July, the first decline in four months and the second‑lowest monthly total in 11 years according to the Housing Industry Association. Economists said this points to tenuous demand and persistent weakness in the detached‑home market, which can affect property‑exposed stocks and broader consumer sentiment.

Why were investors focused on the US Federal Reserve chairman's speech and how can it affect Australian markets?

Investors were awaiting the Fed chairman's speech for clues on policy direction because last year the Fed used the annual conference to foreshadow further bond buying. Any signals about US interest rates or monetary stimulus can influence global markets and risk appetite on the ASX.

Which companies reported strong profits and how did their shares react?

Aristocrat Leisure reported a 40% rise in first‑half net profit to $34.7 million and its shares jumped to $2.76. Flight Centre reported a 43% boost to full‑year profit and its shares climbed to $23.70. Seven Group Holdings more than doubled full‑year profit and its shares rose to $8.05, though the company said it remained cautious about China and Australia’s media sector.

What happened with GrainCorp and the Integro sale?

GrainCorp was placed in a trading halt and last traded at $9.85 after Goodman Fielder sold its oils business, Integro, for $170 million to a consortium that includes GrainCorp and Gardner Smith.

How did Lend Lease shares respond to news about the Barangaroo development?

Lend Lease shares rose to $8.20 after federal Skills Minister Chris Evans said more than 100,000 jobs and training opportunities for 500 apprentices and thousands of other workers would be generated by Sydney’s Barangaroo development.

Does the housing slump mean investors should avoid property‑related stocks?

The article highlights weaker new home sales and detached‑home weakness, which suggests caution for property‑exposed stocks. However, the market still rose overall due to corporate results and other factors, so investors should weigh housing indicators alongside company earnings and broader market drivers rather than avoiding an entire sector outright.

What practical signals from this update should everyday investors monitor next?

Watch upcoming central bank commentary (the Fed speech), profit‑reporting updates, housing indicators such as new home sales and detached‑home strength, and company‑specific news like M&A or trading halts (for example GrainCorp/Integro). These items influence sector performance and help inform short‑ and medium‑term portfolio decisions.