Index holds on to sliver of early surge

THE sharemarket closed higher yesterday, but only just, as investors prepared for Europe's leaders to begin a two-day meeting on the region's debt crisis.

By InvestSMART · 29 Jun 2012

By InvestSMART ·
29 Jun 2012

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THE sharemarket closed higher yesterday, but only just, as investors prepared for Europe's leaders to begin a two-day meeting on the region's debt crisis.

Trading started strongly after better than expected US housing data helped lift Wall Street and European markets overnight.

The market jumped 30 points in the first 90 minutes after figures showed pending US home sales had climbed 5.9 per cent in May, following a 5.5 per cent fall in April.

But momentum fizzled as shareholders turned their attention to Europe, and the likelihood that its leaders might produce something substantial to tackle the region's debt contagion.

The S&P/ASX 200 Index finished with a gain of 1.6 points at 4044.8.

Analysts said they had little hope that much would be achieved at the European summit.

"In the 2 years since the sovereign crisis in the eurozone began, there have been countless expressions of solidarity and support between member states, but very little . . . progress towards genuine closer integration," HSBC Global's chief economist, Janet Henry, said in a note to clients.

"The markets are desperately hoping, even if they are not expecting, that the meeting . . . will provide some long-awaited clarity on what the future path of eurozone integration might be."

Energy stocks weighed heavily on the benchmark index, with oil and gas producer Santos dropping 59? (5.3 per cent) to $10.45 after it said the cost of its Gladstone liquefied natural gas project had risen 15 per cent.

BHP Billiton climbed 13? to $30.73 and Rio Tinto rose 8? to $55.16.

Among the big banks, Commonwealth rose 47? to $52.62 but NAB was 4? weaker at $23.34, ANZ lost 4? to $21.50 and Westpac shed 10? to $20.82.

News Corp rose 87?, or 4.1 per cent, to $22.37 on reports from the US that the board had approved the split of its entertainment and publishing divisions.

Shares in Caltex rose 13? to $13.28 on its bullish earnings forecast.

The dollar jumped half a US cent in early morning trade on aggressive buying by US investment bank Goldman Sachs that caught the market off guard. It finished at US101.15?, up from US100.55?.

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Frequently Asked Questions about this Article…

How did the S&P/ASX 200 perform yesterday and what were the main market moves?

The S&P/ASX 200 finished marginally higher, up 1.6 points at 4,044.8. Trading began strongly with a roughly 30‑point jump in the first 90 minutes, but momentum faded as investors turned their attention to a two‑day European leaders' meeting on the region's debt crisis.

Why did the market rally early in the session and then lose steam?

The early rally was sparked by stronger‑than‑expected US housing data — pending US home sales climbed 5.9% in May after a fall in April — which helped lift Wall Street and European markets overnight. The rally lost steam as shareholders focused on the European summit and whether leaders would produce substantial measures to address the eurozone debt contagion.

How did concerns about the eurozone debt crisis affect investor sentiment on the ASX?

Investors became cautious ahead of the two‑day European summit, with analysts expressing little hope of major breakthroughs. HSBC Global’s chief economist Janet Henry noted that while there have been many expressions of solidarity among member states, there has been little progress toward closer integration — a factor that left markets hoping for clarity but not necessarily expecting it.

What happened to Santos shares and why did they fall?

Santos weighed on the market after announcing cost increases for its Gladstone LNG project. The company's shares dropped 5.3% to $10.45 following news that the project’s cost had risen by about 15%.

How did major miners and resources stocks perform, including BHP Billiton and Rio Tinto?

Big miners were stronger in the session: BHP Billiton rose to $30.73 and Rio Tinto climbed to $55.16, helping offset weakness elsewhere in the market.

What was the performance of Australia’s big banks during the day?

Bank results were mixed: Commonwealth Bank rose to $52.62, while National Australia Bank was weaker at $23.34. ANZ fell to $21.50 and Westpac declined to $20.82.

Why did News Corp shares move higher, and what was the market reaction?

News Corp shares rose about 4.1% to $22.37 after reports from the US indicated the board had approved splitting the company’s entertainment and publishing divisions — news that investors reacted positively to.

What caused the Australian dollar to move during the session?

The Australian dollar jumped about half a US cent in early trade after aggressive buying by US investment bank Goldman Sachs caught the market off guard. It finished the session at roughly US101.15 cents, up from around US100.55 cents.