Late bank rally prevents bourse from going backwards
The benchmark S&P/ASX200 index reversed early losses to rise 0.5 points, or 0.01 per cent, to 5035.6 points, thanks to a late rally from the big banks.
Materials stocks generally finished weaker. Rio Tinto shed 18¢, or 0.3 per cent, to $57.50, while BHP Billiton, after an initial 1.2 per cent dip, clawed back losses to finish up 4¢, or 0.1 per cent, to $34.77.
Arab Bank Australia treasury dealer David Scutt attributed the materials sector's lacklustre performance to Caterpillar posting a 43.5 per cent drop in quarterly profit, which was $US960 million ($1.04 billion), or $US1.45 a share, down from $US1.70 billion, or $US2.54 a share, a year earlier.
The US company, is the world's biggest manufacturer of mining and construction equipment, and hence a barometer to the strength of global mining activity, which was rattled after the release of weak manufacturing data from China.
Newcrest Mining shares fell 16¢, or 1.3 per cent, to $12.53 after it forecast a flat year ahead. St Barbara fell 13.5¢, or 20.8 per cent, to close at 51.5¢, after announcing gold operations in the Pacific failed to meet expectations for the year.
Amid the bleak forecasts was a flicker of light. The economy of Australia's fourth biggest trading partner, South Korea, grew at its fastest pace in two years, expanding 2.3 per cent in the April-June quarter, compared with the same period last year. But the risks of a slowing Chinese economy linger.
"In terms of South Korea's importance to Australia's economy, roughly about 5 or 6 per cent of our international trade is via them," Mr Scutt said. But China "takes precedence over all others at the moment", he said.
Among the banks, Commonwealth rose 62¢, or 0.9 per cent, to $73.52. Westpac firmed 31¢, or 1 per cent, to $30.06. NAB was 20¢ higher at $30.87, while ANZ advanced 14¢ to $29.12.
Frequently Asked Questions about this Article…
The S&P/ASX200 just managed its fourth straight day of gains, rising 0.5 points (0.01%) to 5,035.6 points. A late rally from the big banks helped reverse early losses and prevented the bourse from going backwards.
Materials stocks were lacklustre after Caterpillar reported a 43.5% drop in quarterly profit (to US$960 million, or about $1.04 billion), a result seen as a barometer of global mining activity. Weak manufacturing data from China also rattled investor confidence in the sector.
Rio Tinto fell 18¢ (0.3%) to $57.50. BHP Billiton initially dipped about 1.2% but recovered to finish up 4¢ (0.1%) at $34.77 by the close.
Newcrest Mining forecast a flat year ahead and its shares fell 16¢ (1.3%) to $12.53. St Barbara said its Pacific gold operations failed to meet expectations, and its shares dropped 13.5¢ (20.8%) to close at 51.5¢.
The big four banks helped drive the late rally: Commonwealth rose 62¢ (0.9%) to $73.52; Westpac gained 31¢ (1%) to $30.06; NAB was up 20¢ to $30.87; and ANZ advanced 14¢ to $29.12.
Investor sentiment was influenced by weak Chinese manufacturing data, which heightened concerns about a global mining slowdown. On the brighter side, South Korea—Australia's fourth-biggest trading partner—grew 2.3% year‑on‑year in the April–June quarter, though China remains the dominant risk.
Caterpillar is the world's biggest manufacturer of mining and construction equipment, so its profit decline is viewed as a bellwether for global mining activity. A big drop in its quarterly profit signalled weaker demand and contributed to pressure on materials stocks.
The article notes South Korea is Australia’s fourth‑largest trading partner and accounts for roughly 5–6% of international trade with Australia. However, the piece emphasises that China 'takes precedence over all others' right now as the primary economic risk for Australian markets.
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