DESPITE a dip yesterday, the sharemarket has had its best run in weeks, gaining 2.8 per cent over five sessions, after investors put their risk aversion to one side and piled into equities.
Positive profit results and renewed optimism from the US helped buoy investors, who only last week watched the benchmark index drop nearly 2 per cent.
That optimism was particularly evident on Thursday when the market put on more than $24 billion in value to close on a two-month high, with resource and energy stocks the biggest beneficiaries.
The dollar was holding at a six-week high against the greenback US104.09? at the close of the Australian session as the June-quarter terms of trade data was released. It was also at near-record levels against the euro.
The foreign-trade price figures showed the terms of trade, a key indicator for the Australian economy, still in negative territory despite the import price index gaining 2.4 per cent in the three months to June and the export price index rising 1 per cent.
The S&P/ASX 200 Index eased 7.6 points, or 0.18 per cent, yesterday to 4199.1.
IG Markets market strategist Stan Shamu said investors appeared to be taking a breather. "Today there seemed to be a lack of fresh positive drivers on Asian markets," he said. "There's just been a lot of profit-taking and quiet consolidation. Investors are happy to lock in some of the gains from the week."
Mr Shamu said it was hard to tell where the next driver for global markets would come from.
He said there were still plenty of issues in focus, including the economic health of Spain, the possibility of further economic stimulus in the US and China, and the results of the current company earnings season in the US.
Economists were preparing for the release of second-quarter inflation data from the Bureau of Statistics.
"Based on our figuring, the [June-quarter] price data will not stand in the way of a near-term rate cut. But nor will it unequivocally make the case for lower interest rates," said Commonwealth Bank chief economist Michael Blythe.
"The one exception would be an inflation print that suggested a risk of undershooting the 2-3 per cent target band for an extended period."
The big banks all slipped yesterday, Westpac losing 10? to $22.85, ANZ 16? to $23.07, NAB 9? to $23.99 and Commonwealth 78? to $55.12.
BHP Billiton gained 26? to $31.36 and Rio Tinto edged up 3? to $53.39.
Uranium explorer Energy and Minerals Australia rose nearly a cent, to 9?, after it said the prompt granting of a mining licence for its Mulga Rocks project boosted confidence that it would go into production.
Shares in Ten Network firmed 1? to 51.5? after it agreed to sell outdoor advertising business Eye Corp to Outdoor Media Operations for up to $145 million.
Frequently Asked Questions about this Article…
How did the Australian sharemarket perform last week and where did the S&P/ASX 200 finish?
The sharemarket had its best run in weeks, gaining about 2.8% over five sessions as buyers returned. The S&P/ASX 200 index eased 7.6 points yesterday to finish at 4,199.1, and the market added more than $24 billion in value on Thursday to close at a two‑month high.
What were the main drivers behind the recent ASX rally?
The rally was driven by positive company profit results and renewed optimism from the US, which encouraged investors to take more risk. Resource and energy stocks were the biggest beneficiaries during the lift in investor sentiment.
Which sectors and major miners benefited most from the market upswing?
Resource and energy sectors led the gains. Large miners saw rises — BHP Billiton climbed to about $31.36 and Rio Tinto edged up to about $53.39 — reflecting stronger demand for resource stocks during the rally.
What happened to the big Australian banks during the market move?
The big banks slipped amid the consolidation. According to the article, Westpac closed around $22.85, ANZ around $23.07, NAB about $23.99 and Commonwealth Bank about $55.12, all recording declines on the day.
How did currency and terms of trade data influence market sentiment?
The Australian dollar was holding at a six‑week high against the US dollar and near‑record levels versus the euro when June‑quarter terms of trade data were released. The terms of trade remained in negative territory even though the import price index rose 2.4% and the export price index rose 1% in the three months to June.
Will the June‑quarter inflation data affect interest rates in Australia?
Commonwealth Bank chief economist Michael Blythe said their reading of the June‑quarter price data would not prevent a near‑term rate cut, but it also wouldn’t clearly make the case for lower rates. He noted the exception would be an inflation print indicating a risk of under‑shooting the 2–3% target band for an extended period.
Are there company‑specific updates investors should know from the article?
Yes. Uranium explorer Energy and Minerals Australia rose nearly a cent to about 9c after the prompt granting of a mining licence for its Mulga Rocks project, boosting confidence it will go into production. Ten Network’s shares firmed to about 51.5c after it agreed to sell outdoor advertising business Eye Corp to Outdoor Media Operations for up to $145 million.
What market events should everyday investors watch next?
Investors should watch upcoming second‑quarter inflation data from the Bureau of Statistics, ongoing US company earnings, and any signs of further economic stimulus in the US or China. Global risks flagged in the article include the economic health of Spain and the potential for profit‑taking and consolidation, which could influence near‑term market direction.
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