Market 'delicately poised' as fears remain

THE sharemarket rose almost 1 per cent yesterday, in the second day of gains, as markets recovered from massive losses on hopes of a solution to Europe's debt crisis. But investors remained unsure whether a solution to the crisis could be found amid conflicting media reports.

By InvestSMART · 29 Sep 2011

By InvestSMART ·
29 Sep 2011

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IG Markets dealer Chris Weston said the local market was "delicately poised" yesterday. Investor confidence that Europe would announce fresh measures to stave off contagion of a Greek default, including expanding its European Financial Stability Fund, had unravelled somewhat, he said.

The benchmark S&P/ASX 200 Index rose 34.9 points, or 0.87 per cent, to close at 4039.5.

Patersons Securities associate director John Curtin said a rise in commodity prices overnight had kept the market in recovery mode after the massive losses.

Consumer discretionary stocks led the market, closing 1.4 per cent higher, with department store company David Jones gaining 4.6 per cent to $2.93 and Myer rising 4.5 per cent to $2.10.

There were broad-based gains in all sectors, except for healthcare stocks, which lost 0.2 per cent. Energy stocks rose 1.4 per cent after world oil prices soared on Tuesday night, mirroring gains on world equity markets.

Woodside Petroleum gained 3.5 per cent, or $1.08, to $31.94 and Santos added 3? to $11.06.

But RBS Morgans senior equities adviser Geoff Voller said trade had been sluggish and volumes relatively light, given a strong lead from global markets overnight.

Turnover was 2.23 billion shares changing hands for $6.09 billion, with almost seven of every 10 stocks rising.

"It was a bit of a disappointing reaction but, given the uncertainty in Europe, I suppose it's not too surprising," he said. "There's just no real volume or confidence in the market."

Chemical maker Orica's shares jumped 3.7 per cent to $23.20 despite higher than permitted mercury vapour levels being detected around its Sydney plant, just weeks after residents near its Newcastle plant were exposed to hexavalent chromium.

Drilling services group Boart Longyear was the best-performing stock on the ASX 100, gaining 6.1 per cent to $2.80. The weakest company on the same index was Fortescue Metals, which lost 7.9 per cent to $4.52.

The closing price of gold in Sydney was $US1652.83 an ounce, up $US2.11 from Tuesday's close.

The Australian dollar rose slightly. At the local close, it was at US98.87?, up from US98.65? on Tuesday.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket rise nearly 1% and what does that mean for everyday investors?

The S&P/ASX 200 rose 34.9 points, or 0.87%, to close at 4,039.5 as markets recovered from recent heavy losses. The bounce was driven by hopes of a solution to Europe’s debt crisis and a lift in commodity prices overnight, but commentators warned the market remained “delicately poised” and uncertain because of conflicting reports about whether Europe would announce fresh measures to contain contagion from a possible Greek default.

Which sectors led the market recovery and which sectors lagged?

Consumer discretionary stocks led the gains, closing about 1.4% higher — department store names like David Jones (up 4.6% to $2.93) and Myer (up 4.5% to $2.10) were strong. Energy stocks also rose around 1.4% after world oil prices jumped. Healthcare was the only sector to fall, down about 0.2%.

How did major energy companies perform on the day?

Energy stocks benefited from higher oil prices. Woodside Petroleum gained 3.5% (up $1.08) to $31.94, while Santos added about 3% to finish at $11.06, reflecting the broader lift in the oil-linked sector.

What happened with Orica shares despite environmental concerns?

Orica’s shares jumped 3.7% to $23.20 even though higher-than-permitted mercury vapour levels were detected around its Sydney plant, and only weeks after residents near its Newcastle plant were exposed to hexavalent chromium. The stock’s rise shows market moves don’t always mirror company-specific issues on the same day.

Which individual ASX 100 stocks were the best and worst performers that day?

Drilling services group Boart Longyear was the best-performing ASX 100 stock, gaining 6.1% to $2.80. The weakest was Fortescue Metals, which fell 7.9% to $4.52.

Was trading activity strong during the market rise and what does that indicate?

Turnover was moderate: 2.23 billion shares changed hands for $6.09 billion. RBS Morgans’ Geoff Voller described trade as sluggish and volumes relatively light despite positive global leads, suggesting limited confidence and that the rally lacked broad conviction.

How did commodity prices and gold move, and how did the Australian dollar react?

World oil prices soared overnight, supporting energy stocks. Gold closed in Sydney at US$1,652.83 an ounce, up US$2.11 from the prior close. The Australian dollar rose slightly to about US98.87¢ from US98.65¢ at the previous local close.

Should investors be worried about the Europe debt crisis affecting the Australian market?

The article notes investors remain uneasy: the market was described as “delicately poised” because confidence that Europe would expand measures such as the European Financial Stability Fund to prevent contagion from a possible Greek default had weakened amid conflicting media reports. That uncertainty can translate into volatility for Australian markets, so investors should be aware of the ongoing headline risk.