Investors shrug off slump on Wall Street

DOMESTIC shares closed more than 2 per cent higher yesterday, making back losses from the previous two trading sessions as positive local economic news helped investor confidence.

By InvestSMART · 8 Sep 2011

By InvestSMART ·
8 Sep 2011

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DOMESTIC shares closed more than 2 per cent higher yesterday, making back losses from the previous two trading sessions as positive local economic news helped investor confidence.

The S&P/ASX200 index rose 107.9 points, or 2.7 per cent, to 4183.4, and the All Ordinaries index jumped 102.2 points, or 2.5 per cent, to 4262.9.

The market opened stronger, bucking a slump on Wall Street after the US Labour Day public holiday.

The Ord Minnett research analyst Ron Cameron said the market drifted higher after the Bureau of Statistics announced the economy had returned to growth. Gross domestic product was up 1.2 per cent in the June quarter, after the previous quarter's downturn because of summer floods and cyclones.

"The market was rallying a little before that, but notwithstanding they [GDP figures] came in above economists' expectations, which were just lowered the other day after net exports came in, so it gave the market a bit of enthusiasm and we've held gains for most of the day, which is quite encouraging," Mr Cameron said.

The financial and materials sectors led the market, up 2.9 per cent and 2.8 per cent, respectively. The major banks were higher, with National Australia Bank up 80? to $22.94.

Westpac gained 57? to $20.07, Commonwealth Bank rose $1.51 to $47.49 and ANZ rose 77? to $20.03.

Among the miners, BHP Billiton was up $1.35 at $38.23, and Rio Tinto was $2.19 higher at $70.60. Atlas Iron was the best performing stock, gaining 20?, or 5.7 per cent, to $3.74.

Investment bank Macquarie Group shares closed up 37? at $23.53 after it reduced its earnings guidance, saying it expected its first half profit to decline from a year earlier due to difficult trading conditions and a higher tax rate. Wesfarmers was 92? higher at $30.57 after Coles said it would source more cheese locally.

The spot price of gold in Sydney closed at $US1837.20 per fine ounce, down $69.43 from Tuesday's close of $US1906.63. National turnover was 2.3 billion shares changing hands for $5.26 billion, with 683 stocks up, 356 down and 339 steady, with only seven stocks in the ASX 100 trading lower.

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Frequently Asked Questions about this Article…

What happened on the ASX yesterday — did shares rise or fall?

Australian shares rallied — the S&P/ASX 200 climbed 107.9 points (about 2.7%) to 4,183.4 and the All Ordinaries jumped 102.2 points (about 2.5%) to 4,262.9, recovering losses from the previous two sessions.

Why did the ASX rally even though Wall Street was weak?

Local economic news drove the rally: the Australian Bureau of Statistics reported GDP returned to growth, up 1.2% in the June quarter after a prior downturn caused by summer floods and cyclones. That better‑than‑expected data boosted investor confidence despite a slump on Wall Street and the US Labour Day holiday.

Which sectors led the market gains and what does that mean for investors?

The financial and materials sectors led the market, rising about 2.9% and 2.8% respectively. For everyday investors, that means banks and miners were among the biggest contributors to the index gains on the day.

How did the big banks perform and which bank moves were notable?

Major banks were higher: National Australia Bank traded around $22.94, Westpac around $20.07, Commonwealth Bank rose $1.51 to $47.49, and ANZ traded near $20.03. Overall the banking sector helped lift the market.

What happened with major miners like BHP and Rio Tinto, and were any miners standouts?

Miners were stronger: BHP Billiton rose about $1.35 to $38.23 and Rio Tinto increased roughly $2.19 to $70.60. Atlas Iron was the best performer among miners, up about 5.7% to $3.74 on the day.

Why did Macquarie Group shares rise even after it cut earnings guidance?

Macquarie Group shares closed higher at $23.53 despite the bank reducing its earnings guidance. The company said first‑half profit was expected to decline from a year earlier because of difficult trading conditions and a higher tax rate — but its shares still finished up on the trading day.

What drove the move in Wesfarmers shares and how is Coles involved?

Wesfarmers shares rose to about $30.57 after Coles — a Wesfarmers business — said it would source more cheese locally. The sourcing decision appeared to be viewed positively by investors on the day.

What were trading volumes and how did commodities like gold perform?

National turnover was 2.3 billion shares worth about $5.26 billion. Market breadth was strong with 683 stocks up, 356 down and 339 steady, and only seven stocks in the ASX 100 trading lower. The spot price of gold in Sydney closed at US$1,837.20 per fine ounce, down US$69.43 from the previous close of US$1,906.63.