Investors defy European gloom with a local rally
BUOYED by a boost to industrial stocks, the Australian sharemarket rebuffed the turmoil suffered by its global counterparts in the wake of the euro zone debt crisis to close more than 1 per cent higher yesterday.
BUOYED by a boost to industrial stocks, the Australian sharemarket rebuffed the turmoil suffered by its global counterparts in the wake of the euro zone debt crisis to close more than 1 per cent higher yesterday.The S&P/ASX 200 rose 52.4 points to 4296.5 points on turnover of $5.7 billion, the highest daily figure since October 28. Investors dashed into the market midway through the day in a rally that was prompted by moves to cover short positions.It capped an extraordinary week in Europe, in which Italy and Greece lost prime ministers and Italian bond yields revealed bond holders were seriously concerned about its ability to repay debt.The head of international equities at Wingate Group, Chad Padowitz, said markets would re-focus on corporate news when sovereign issues calmed down."It is Europe when something in Europe happens ... but when you get a few weeks where things are in the background [attention] rushes on to corporate earnings and what is happening in the US at a company specific level," he said.So far there had been good news from large retailers and banks, which have experienced a decrease in bad debts, Mr Padowitz said."I think [earnings] have come out roughly in line with expectations. Most companies have done a reasonable job of managing costs and expectations, but chief executives are cautious," he said.But a Wilson Asset Management equities analyst, Martin Hicks, said that in the current market it was hard to find Australian companies with strong earnings growth. "It is all about the European headlines. There is extreme volatility and uncertainty," he said.However, there was some good news on the horizon because the Reserve Bank's recent cut to the official cash rate was likely to lead to more rate cuts, he said.Fairfax dipsSHARES in Fairfax Media, publisher of the Herald, dropped 6.5? to 86? as the market responded to the news that major shareholder and the media family scion, John B. Fairfax, had sold his stake in the company. After the decision to offload his 9.7 per cent holding which was placed with institutions at 85? a share 82.8 million shares changed hands on Friday, making the stock the biggest mover by volume.John B. Fairfax: On the outside now looking in Page 10