Investors embark on shopping spree

KEY earnings results yesterday buoyed investor sentiment, pushing the market to its best close in more than three months.

By InvestSMART · 17 Aug 2012

By InvestSMART ·
17 Aug 2012

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KEY earnings results yesterday buoyed investor sentiment, pushing the market to its best close in more than three months.

The benchmark S&P/ASX 200 Index rose 49 points, or 1.1 per cent, to close at the day's high of 4330.2.

The market's broad-based gains were led by the consumer staples sector, up 2.4 per cent, thanks to a strong performance by Coles owner Wesfarmers.

RBS Morgans client adviser Bill Chatterton said investors ignored negative leads from the US to snap up big local companies.

"There's a positive undercurrent," Mr Chatterton said. "We've been nicely surprised by reporting season results, so the market is broadly responding to that."

Strong results from AMP also buoyed investor confidence. AMP was 20? higher at $4.36 after its $4 billion merger with AXA Asia Pacific contributed to a 7 per cent rise in underlying first-half profit.

Wesfarmers shares rose $1.23, or 3.8 per cent, to $33.72 after strong earnings at its Coles supermarket chain helped lift full-year profit by 11 per cent to $2.1 billion.

Among the banks, Commonwealth Bank rose $1 to $57.05, National Australia Bank was 24? stronger at $24.50, Westpac gained 44? to $24.12 and ANZ was 27? higher at $23.90.

Resource stocks were mixed, with BHP Billiton up 26?, or 0.8 per cent, at $32.88 and Rio Tinto down 35?, or 0.64 per cent, at $54.74.

Analysts said investors were switching out of miners into financial stocks and other sectors as global expectations for further stimulus measures in the US were scaled back.

"Diminishing expectations of US quantitative easing has given traders reason to continue the switch out of miners into banks, industrials and staples," said CMC Markets trader Ben Taylor.

"As quantitative easing hopes fade, so does the prospects of higher commodity prices. Our miners are comparatively weaker today against other sectors and investors continue the switch."

One of the biggest losers of the day was building materials group Adelaide Brighton, which fell 35?, or almost 11 per cent, to $2.90 despite a $67.5 million first-half net profit that was up 9.8 per cent from the previous corresponding period.

ASX shed 11? to $31.30 after it said full-year profit dropped 4 per cent because investor activity had fallen.

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Frequently Asked Questions about this Article…

What drove the S&P/ASX 200 to its best close in more than three months?

The benchmark S&P/ASX 200 rose 49 points to close at 4,330.2, pushed higher by positive earnings results during reporting season. Strong company results — led by consumer staples and big financials like AMP — and a generally positive investor undercurrent helped the market record its best close in over three months.

Why did Wesfarmers shares rise and how much did Coles contribute?

Wesfarmers shares jumped after strong earnings at its Coles supermarket chain helped lift full‑year profit by 11% to $2.1 billion. The article reports Wesfarmers rose $1.23, or about 3.8%, to $33.72, with Coles’ performance cited as a key contributor to the gain.

How did AMP perform and what role did its merger with AXA Asia Pacific play?

AMP rose after reporting better underlying results: the merger with AXA Asia Pacific contributed to a 7% rise in underlying first‑half profit. The article notes AMP was around 20 cents higher at $4.36 following those results and the merger news.

How did the major Australian banks trade on the day?

Banks featured among the day’s gainers: Commonwealth Bank rose $1 to $57.05, National Australia Bank was about 24 cents stronger at $24.50, Westpac gained roughly 44 cents to $24.12, and ANZ was about 27 cents higher at $23.90, according to the article.

Why were resource stocks mixed and why are investors switching into banks and staples?

Resource stocks were mixed — BHP rose about 26 cents (0.8%) to $32.88 while Rio Tinto fell about 35 cents (0.64%) to $54.74. Analysts in the article said fading expectations of further US quantitative easing reduced hopes for higher commodity prices, prompting traders to switch out of miners and into banks, industrials and staples.

Why did Adelaide Brighton shares fall despite reporting higher profit?

Adelaide Brighton was one of the day’s biggest losers, falling about 35 cents — almost 11% — to $2.90, even though it reported a $67.5 million first‑half net profit, up 9.8% from the prior corresponding period. The article highlights the share drop happened despite the profit beat.

Which sector led the market’s gains and how big was the move?

The consumer staples sector led the broad‑based gains, rising about 2.4%, driven largely by the strong performance of Coles owner Wesfarmers, as reported in the article.

What happened to ASX’s own shares and why did they fall?

ASX shares fell about 11 cents to $31.30 after the company said full‑year profit dropped 4% because investor activity had fallen, according to the article.