Investors fuel rise with faith in banks

THE local market rose for a third straight day yesterday, the longest winning run since June 7, as investors bet that central banks would step up efforts to stoke global growth.

By InvestSMART · 31 Jul 2012

By InvestSMART ·
31 Jul 2012

Comments

THE local market rose for a third straight day yesterday, the longest winning run since June 7, as investors bet that central banks would step up efforts to stoke global growth.

The S&P/ASX 200 benchmark index rose 35.9 points, or 0.9 per cent, to 4245.7 the highest close since May 15. With one day to go, the index is up 3.7 per cent, placing it on course for its best monthly gain since January.

Financial stocks were among the best performers, with the big four banks contributing almost half the index's gain.

Commonwealth Bank closed at a 26-month high, adding $1.02 to $57.20. Westpac rose 26? to $23.26, ANZ added 32? to $23.40, and NAB increased 36?, to $24.61.

Telstra touched $4 for the first time since December 2008 before easing back to close 2?, or 0.5 per cent, higher at $3.98.

US Federal Reserve officials meet tomorrow to discuss monetary policy, which investors hope will include indications of another round of stimulus for the slowing US economy. European officials also meet later this week, with similar expectations swirling about extra stimulus and other efforts to contain borrowing costs for major members such as Italy and Spain.

The dollar, meanwhile, eased back from a four-month high of just under US105? earlier in the day to close at US104.65?. The local market opened higher after advances on Friday on Wall Street and European markets. Australia's gains were mid-range in the region, with most markets higher.

European political and financial heads said they were prepared to do everything to protect the single currency, comments that helped buoy European stocks for a third straight session in early trading.

CMC Markets analyst Ric Spooner said European leaders' comments buoyed risk assets, with investors happy to push up Australian banks stocks if they thought the cost of borrowing would drop.

Important Chinese manufacturing figures are due out tomorrow and will raise anxiety about resource stocks if they are weak.

Fortescue Metals was one miner to lose ground amid doubts about how it would fund cost blowouts on its expansion project.

Falling iron ore prices are adding to concerns for the sector, with prices sinking almost 15 per cent in the past 13 trading days.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

Why did the S&P/ASX 200 rise and how much did the index gain?

The S&P/ASX 200 rose as investors bet central banks would step up efforts to stoke global growth. The index climbed 35.9 points (0.9%) to 4245.7 — its highest close since May 15 — and was up about 3.7% month-to-date, on track for its best monthly gain since January.

How did the big four Australian banks perform and why did they push the market higher?

Financial stocks were among the best performers, with the big four banks contributing almost half the index’s gain. Commonwealth Bank hit a 26‑month high, closing at $57.20, while Westpac closed at $23.26, ANZ at $23.40 and NAB at $24.61. Investors pushed bank stocks higher on hopes that central bank action could reduce borrowing costs.

What happened to Telstra’s share price in the recent session?

Telstra briefly touched $4 for the first time since December 2008 before easing back to close at $3.98, up about 0.5% on the day.

Which central bank and political events were investors watching and why does that matter?

Investors were watching a US Federal Reserve meeting and European official meetings for signs of further stimulus. Comments from European political and financial leaders about protecting the single currency also helped buoy markets — investors hope such actions will support global growth and lower borrowing costs.

What risks are highlighted for resource stocks and miners like Fortescue Metals?

The article flags several risks: important Chinese manufacturing figures were due (weak data could hurt resource demand), Fortescue Metals lost ground amid doubts about funding cost blowouts on its expansion, and falling iron ore prices — down almost 15% over the past 13 trading days — added pressure on the sector.

How did global markets and currency moves influence the Australian market open?

The local market opened higher after advances on Wall Street and European markets. The Australian dollar also reacted to global moves: the article notes the dollar eased back from a four‑month high to close at about US104.65, reflecting changing expectations about stimulus and growth.

What did market commentators say about the drivers behind the rally in bank stocks?

CMC Markets analyst Ric Spooner said comments from European leaders buoyed risk assets, and investors were willing to push up Australian bank stocks if they believed the cost of borrowing would drop — linking hopes for policy stimulus to stronger bank share performance.

What immediate data or events should everyday investors keep an eye on according to the article?

The article recommends watching the upcoming US Federal Reserve meeting, European official meetings for signs of stimulus, and key Chinese manufacturing figures due soon — these events can influence global growth expectations, currency moves, and resource‑sector sentiment.