Market loses steam after brief rally

The benchmark S&P/ASX 200 index rose 11.6 points, or 0.3 per cent, to 4055.3 yesterday, while the broader All Ordinaries Index added 12.3 points, or 0.3 per cent, to 4104.7.

Among the major sectors, materials and energy gained 0.4 per cent, while financials inched up 0.2 per cent. Industrials fell 0.6 per cent and consumer discretionary stocks slipped 0.1 per cent.

Local stocks opened about 0.4 per cent higher, as investors took their cues from a positive night on offshore markets. The market then reacted positively to figures that showed the domestic economy grew a better-than-expected 1.3 per cent in the March quarter.

The Australian dollar leapt as high as US98.62? yesterday, from US97.43?, to last trade at US98.56?, bolstered by the surprisingly strong economic growth data that may lessen the urgency for further deep interest rate cuts. Against the yen, it jumped to 77.80 yen, more than a yen higher from early trade.

The sharemarket rally petered out in the afternoon as investors dug a bit deeper behind the headline numbers.

A Lonsec senior client adviser, Michael Heffernan, said that while the GDP data looked OK on the surface, it was not necessarily a true indication of how the economy was travelling.

"There was a bit of ebullience after the national accounts figures came out. However, closer analysis shows that the major reason why real GDP went up was because overall prices went down largely due to export prices falling," he said.

An IG Markets strategist, Stan Shamu, said the growth numbers prompted a sharp rise in the Australian dollar, whose gains in equity markets were capped as industrials stocks struggled, falling 0.6 per cent.

The big four retail banks ended mixed. ANZ rose 2? to $21.34, Commonwealth Bank gained 5? to $50.05, NAB dropped 30? to $22.25 and Westpac fell 24? to $20.35.

Qantas reached fresh lows as investors continued to react negatively to its shock profit downgrade on Tuesday.

The stock fell to a low of $1.10, before closing down 3?, or 2.6 per cent, at $1.125, extending Tuesday's 19 per cent decline.

Preliminary national turnover was 1.5 billion securities worth $4 billion, with 549 stocks up, 390 down and 406 unchanged.