Market lifts on hopes of more austerity measures

THE sharemarket rose nearly 1 per cent yesterday, buoyed by hopes that European leaders may be able to thrash out a deal on the region's debt crisis this week.

By InvestSMART · 6 Dec 2011

By InvestSMART ·
6 Dec 2011

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THE sharemarket rose nearly 1 per cent yesterday, buoyed by hopes that European leaders may be able to thrash out a deal on the region's debt crisis this week.

The local market spent the day in positive territory after Italy's new government announced a raft of austerity measures aimed at eliminating the country's budget deficit by 2013. They included ?17 billion ($22 billion) in new taxes, ?13 billion in public spending cuts and ?10 billion in measures aimed at boosting growth.

IG Markets' Chris Weston said the tough measures boosted hopes that debt-laden Greece might come up with similar measures ahead of a key euro zone meeting on Friday. "The Italians are coming out, guns blazing," he said. "Hopefully that should keep momentum in the bond market going in the right direction."

At the close, the benchmark S&P/ASX 200 Index was up 33.3 points, or 0.8 per cent, at 4321.3, while the All Ordinaries Index rose 33.2 points, or 0.8 per cent, to 4379.5.

Energy stocks got an extra boost as calls for tougher sanctions against Iran over its nuclear program boosted oil prices. Woodside Petroleum ended the session 1.6 per cent, or 53?, higher at $34.19, while Energy Resources of Australia was up 14? at $1.57. Aquila Resources was down 17? to $6.83.

Investors welcomed the proposed merger between Aston Resources and Whitehaven Coal. Aston rose 38? to $9.49, while Whitehaven gained 7? to $5.71.

BHP Billiton was up 61? at $37.26 and Rio Tinto rose 68? to $67.

Mr Weston said that markets remained cautious ahead of a Franco-German summit in Paris overnight and a key two-day European summit later this week.

Data from China showing the country's services sector posted its weakest performance in three months in November added to fears contagion from Europe may take its toll in Asia.

Mr Weston said another failure by European leaders to tackle the region's escalating debt problems could lead to markets plummeting.

"We've seen time and time again these comprehensive packages disappoint," he said.

The price of gold in Sydney closed at $US1744.88 per ounce, up US8?.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket climb nearly 1% yesterday?

The Australian sharemarket rose on hopes European leaders could strike a deal on the region's debt crisis and after Italy unveiled tough austerity measures — lifting investor sentiment and driving gains across local stocks.

What were Italy’s austerity measures and how did they affect market sentiment?

Italy announced a package including about €17 billion in new taxes, €13 billion in public spending cuts and roughly €10 billion in measures to boost growth aimed at eliminating the budget deficit by 2013. Investors saw the moves as a positive signal that other debt‑strained countries might follow, improving bond market momentum and market confidence.

How did the ASX 200 and All Ordinaries perform during the rally?

The benchmark S&P/ASX 200 closed up 33.3 points (0.8%) at 4,321.3, while the All Ordinaries rose 33.2 points (0.8%) to 4,379.5, reflecting a broad positive session.

Why did energy stocks get a boost and which energy companies moved notably?

Calls for tougher sanctions on Iran over its nuclear program pushed oil prices higher, giving energy stocks a lift. Woodside Petroleum finished higher at $34.19 and Energy Resources of Australia also rose to $1.57, while some miners and resources names moved in mixed fashion.

How did investors react to the proposed merger between Aston Resources and Whitehaven Coal?

Investors welcomed the proposed merger: Aston Resources rose to $9.49 and Whitehaven Coal gained to $5.71 on the merger news, reflecting positive market reception to the deal.

What happened to big miners like BHP Billiton and Rio Tinto during the session?

Big miners rallied alongside the broader market — BHP Billiton traded up to $37.26 and Rio Tinto rose to about $67, contributing to the overall market lift.

Are there any risks investors should watch related to Europe and Asia?

Yes. Markets remained cautious ahead of a Franco‑German meeting and a key two‑day European summit, and analysts warned that failure by leaders to contain the debt crisis could cause markets to fall sharply. Weak Chinese services data for November also raised concerns about contagion to Asian markets.

What was happening with gold prices in Sydney amid the market moves?

Gold closed in Sydney at about US$1,744.88 per ounce, reflecting safe‑haven demand as investors weighed geopolitical and economic risks.