Market buoyed by encouraging figures

THE sharemarket rallied to its highest level in three months yesterday, finishing up 0.85 per cent for February, after Wall Street closed at its highest in nearly four years.

By InvestSMART · 1 Mar 2012

By InvestSMART ·
1 Mar 2012

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THE sharemarket rallied to its highest level in three months yesterday, finishing up 0.85 per cent for February, after Wall Street closed at its highest in nearly four years.

The dollar pushed back up above $US1.08, closing at $US1.0804, as investors anticipated a strong take-up overnight of the European Central Bank's second long-term refinancing operation for the region's banks.

The S&P/ASX 200 rose 35.8 points, or 0.8 per cent, to 4298.6.

The rally means the index is up 6 per cent this year, as improved conditions in the US economy helped the Dow Jones Industrial Average break through the 13,000 barrier for the first time since May 2008.

The Australian benchmark was then trading near 6000 points, while the dollar was at US95?.

February has also seen a strong rise in the euro, which has risen from ?1.30 to ?1.34 since February 16.

On the market yesterday, every industry sector except consumer discretionaries finished positively, helped by strong gains by banks and materials stocks.

Commonwealth Bank rose 28?, or 0.6 per cent, to $49.43, as its ATM and eftpos services were brought back online after a nationwide crash. NAB gained 1.6 per cent, up 38? at $23.67. Westpac rose 1.1 per cent, up 22? at $20.90. ANZ rose 7? to $21.95.

City Index chief market analyst Peter Esho said markets in the Asia-Pacific region were quite strong.

The Australian market was boosted by favourable economic data out of Japan and South Korea, and by Australian retail sales data that showed a lift on the previous month and was in line with expectations.

"Despite a lot of companies going ex-dividend today, our market still managed to climb nearly 1 per cent that's a pretty bullish sign for our market," Mr Esho said.

The Japanese government said yesterday that Japan's factory production had risen for a second straight month, boosted by car and camera manufacturing. And figures from South Korea showed that its industrial output unexpectedly rose by 3.3 per cent in January, easing fears of an economic slowdown.

The continuing rally in the price of gold it rose $US45 an ounce in February helped Newcrest gain 18?, to $33.49, while Kingsgate firmed 1.5 per cent, up 10? at $6.86.

BHP Billiton rose 35? to $36.10, while Rio Tinto lost 25? to $67.45.

Insurer QBE gained 1.7 per cent, up 15? at $11.65, after institutional investors stumped up $450 million to replace its tier-2 convertible debt.

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Frequently Asked Questions about this Article…

What drove the recent ASX 200 rally and what were the headline market moves?

The S&P/ASX 200 jumped 35.8 points (about 0.8%) to 4,298.6, lifting the index about 6% year-to-date. The rally was supported by strong US markets, expectations around the European Central Bank's long‑term refinancing operation, and favourable economic data out of Japan and South Korea, as well as Australian retail sales that met expectations.

How did major Australian bank stocks perform and why did they lift the market?

Banks were among the day's leaders: Commonwealth Bank rose about 0.6% to $49.43 after its ATM and eftpos services were restored following a nationwide outage; NAB gained 1.6% to $23.67; Westpac rose 1.1% to $20.90; and ANZ jumped 7% to $21.95. Strong bank gains helped lift most sectors on the market that session.

What impact did the rising gold price have on gold and mining stocks?

Gold continued to rally—up roughly US$45 an ounce in February—which boosted gold miners. Newcrest gained about 18% to $33.49, while Kingsgate firmed about 1.5% to $6.86. The gold price rally was a clear positive driver for those stocks.

Why did some big resources stocks move differently — for example BHP Billiton versus Rio Tinto?

Resource stocks moved unevenly: BHP Billiton rose about 3.5% to $36.10 while Rio Tinto fell roughly 2.5% to $67.45. The article notes materials stocks generally helped the market, but individual company moves can reflect company‑specific news, positioning or investor sentiment even when the sector overall is strong.

How did currency moves affect sentiment — what happened to the dollar and euro?

The Australian dollar pushed back above US$1.08, closing at US$1.0804, and the euro strengthened from about 1.30 to 1.34 since February 16. Such currency moves can influence exporters, importers and commodity prices, and therefore have knock‑on effects for local equity markets.

What economic data from Asia helped support Australian markets?

Positive data from the region helped sentiment: Japan's factory production rose for a second consecutive month—boosted by car and camera manufacturing—and South Korea's industrial output unexpectedly rose 3.3% in January, which eased fears of a slowdown and supported markets across the Asia‑Pacific.

How did QBE's capital support affect its share price and what does that mean for investors?

Insurer QBE gained about 1.7% to $11.65 after institutional investors provided around $450 million to replace its tier‑2 convertible debt. For investors, the deal was interpreted as a positive capital‑support development, helping restore confidence in the insurer's balance sheet.

What does the market climbing despite many companies going ex‑dividend tell everyday investors?

City Index analyst Peter Esho noted that the market climbed nearly 1% despite many companies going ex‑dividend that day, which he described as a bullish sign. For everyday investors, that suggests broader market momentum can outweigh short‑term dividend adjustments, but it's still important to check ex‑dividend dates when planning income or trading around dividends.