Market breaks losing streak but confidence shaky

Strong US retail sales figures boosted investor sentiment.

By InvestSMART · 29 Nov 2011

By InvestSMART ·
29 Nov 2011

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THE sharemarket ended its recent losing streak with firm gains yesterday as hopes mounted that European leaders were closer to finding a solution to the region's debt crisis.

However, an IG Markets strategist, Stan Shamu, warned it could just be a relief rally in what will prove to be a prolonged bear market. After hitting a seven-week low on Friday, the benchmark S&P/ASX200 index rebounded to close up 73.9 points, or 1.85 per cent, at 4058.2. The broader All Ordinaries rose 68.2 points, or 1.68 per cent, at 4125.8.

Mr Shamu said a report suggesting that the International Monetary Fund could offer Italy financial aid boosted investor sentiment, although some analysts said the IMF did not have the resources. Strong US Thanksgiving retail sales figures also boosted investor sentiment.

Mr Shamu said financial and materials stocks led the gains on the local market yesterday, though volumes remained thin.

National Australia Bank was the strongest of the major banks, rising 92?, or 4.22 per cent, to $22.74.

Westpac jumped 76?, or 3.9 per cent, to $20.26, Commonwealth Bank rose $1.50 to $46.89, and ANZ closed 43? higher at $19.20.

Among industrial stocks, Transurban rose 15? to $5.47, while Brambles was up 13? at $6.84.

National carrier Qantas forecast a fall in first half profits due to higher fuel costs and the impact of industrial disputes. The shares rose 5? to $1.505.

Global miner Rio Tinto said market sentiment had worsened in recent months because of Europe's debt woes and economic weakness in the US. Rio shares rose $1.32 to $63.27.

BHP Billiton has promoted the head of its diamond division, Graham Kerr, to be chief financial officer, replacing Alex Vanselow. BHP's chief executive, Marius Kloppers, said the European debt crisis was hampering trade finance. The shares rose 80? to $34.85.

Rare earths miner Lynas Corp was the best performing stock among the top 50, rising 6.8 per cent to $1.175.

Woodside Petroleum fell 76? to $32.60 following the downgrade of oil and gas production targets.

The spot gold price was $US1705.80 an ounce, up $US19.47. Goldminer Newcrest rose $1.08, or 3.2 per cent, to $34.50.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket break its losing streak today?

The Australian sharemarket rebounded as hopes grew that European leaders were closer to a solution for the European debt crisis and a report suggested the IMF might offer Italy financial aid, while stronger-than-expected US Thanksgiving retail sales also boosted investor sentiment. However, some strategists warned this could be a short-lived relief rally rather than a sustained turnaround.

How did the S&P/ASX 200 and All Ordinaries perform in the market rebound?

The benchmark S&P/ASX 200 bounced back, closing up 73.9 points (about 1.85%) at 4058.2, while the broader All Ordinaries rose 68.2 points (around 1.68%) to 4125.8.

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

Financial and materials stocks led the gains on the local market, lifting the index despite thin trading volumes. For everyday investors, sector leadership can indicate where sentiment is strongest, but thin volumes and strategist warnings suggest caution about sustainability.

How did the major Australian banks perform and which bank led gains?

Major banks advanced strongly: National Australia Bank was the strongest, rising about 4.22% to $22.74, Westpac jumped about 3.9% to $20.26, Commonwealth Bank gained $1.50 to $46.89, and ANZ closed higher at $19.20.

What notable company news moved industrial, mining and energy stocks?

There were several company-specific moves: Transurban and Brambles climbed, Rio Tinto said market sentiment had worsened but its shares rose to $63.27, BHP Billiton promoted Graham Kerr to CFO and its shares rose to $34.85, Lynas Corp was the best-performing top-50 stock (up 6.8% to $1.175), Woodside Petroleum fell to $32.60 after downgraded production targets, and Newcrest rose on firmer gold prices.

What did Qantas say about profits and how did the market react?

Qantas forecast a fall in first-half profits due to higher fuel costs and the impact of industrial disputes, yet its shares still rose about 5% to $1.505 on the day.

How are international issues like the European debt crisis affecting investor sentiment on the ASX?

International issues are a key driver: worries about Europe’s debt problems and weaker US economic signals have weighed on sentiment, while any suggestion of IMF support for Italy or signs of an EU solution can spark relief rallies in Australian markets.

After this rebound, what should everyday investors watch next on the market?

Investors should watch developments in the European debt situation and IMF reports, US economic data and retail sales, trading volumes (which were thin during the rebound), commodity and gold prices, and company-specific updates like production guidance or profit forecasts that drove moves in stocks such as Woodside, Qantas, BHP and Rio Tinto.