BROAD-BASED gains on the sharemarket yesterday recouped part of Monday's heavy losses, amid speculation China was seeking to buy into ailing European banks.
The market rose more than 1 per cent in early trade, following a late rally in US stocks triggered by a Financial Times report about China's moves to buy Italian bonds.
Local shares then pulled back somewhat, with the benchmark S&P/ASX 200 Index closing up 34.2 points, or 0.85 per cent, at 4072.7.
Trading volumes were slightly below average, with turnover of 2.08 billion stocks, worth $4.8 billion.
"There's not a huge amount of conviction," CMC Markets chief market strategist Michael McCarthy said.
He said investors were being cautiously optimistic about China's discussions with Italian authorities, with the potential for Chinese investment houses to take on some of the impaired exposures in European banks.
Italian authorities had responded to the Financial Times report, saying bonds were not the primary focus, Mr McCarthy said. "One of the suggestions that keeps coming up is there may be appetite from Chinese investment houses to take stakes in European banks at the share prices we're seeing at the moment," he said.
He said an example of such a bank was France's Societe Generale, which had lost more than 50 per cent in value since August 1.
Mr McCarthy said Chinese investment in European banks "would be a major positive . . . but we're being very cautious because it looks very much like a magic bullet".
If the speculation was correct, it would take some time to determine where and how China would invest, Mr McCarthy said.
Energy stocks outperformed, with the sector up more than 2.5 per cent, compared with Monday's 5 per cent fall.
Origin rose 49?, or 3.9 per cent, to $1, Oil Search advanced 21?, or 3.6 per cent, to $6.05, Santos put on 30?, or 2.8 per cent, to $11.21 and Woodside gained 57?, or 1.8 per cent, to $33.14.
The best performing stock on the S&P/ASX 100 Index was engineering company WorleyParsons, up $1.18, or 4.8 per cent, to $25.70.
The worst performing company in that index was mineral sands miner Iluka, down 47?, or 3 per cent, to $15.26.
Market heavyweight BHP Billiton finished up 84?, or 2.3 per cent, at $37.29, while Rio Tinto appreciated 70?, or 1 per cent, to $68.90.
At the 5pm close, gold was at $US1826.61 an ounce, down $US4.47 on Monday's price.
Frequently Asked Questions about this Article…
What sparked the recent market rally and how did China bond speculation play a role?
The rally was driven largely by speculation that China might buy into ailing European banks or Italian bonds, following a Financial Times report. That late optimism in US stocks carried through to local markets, helping the S&P/ASX 200 recover from Monday’s losses.
How much did the S&P/ASX 200 index gain and what were trading volumes during the rally?
The S&P/ASX 200 closed up 34.2 points, or 0.85%, at 4,072.7. Trading volumes were slightly below average, with turnover of 2.08 billion stocks worth about $4.8 billion.
What did market strategists say about the idea of China investing in European banks?
CMC Markets strategist Michael McCarthy said investors were cautiously optimistic. While Chinese investment into European banks could be a major positive—examples cited include France’s Societe Generale, which has lost more than 50% of its value since August 1—he warned it’s not a guaranteed fix and looks “very much like a magic bullet,” so confirmation and details would take time.
Which sectors led gains and how did energy stocks perform during the rally?
Energy stocks outperformed, with the sector up more than 2.5% after a 5% fall on Monday. Major energy names moved higher—Origin, Oil Search, Santos and Woodside all rose to higher prices (for example, Oil Search to about $6.05 and Woodside to about $33.14 in the session noted).
Who were the best and worst performers on the S&P/ASX 100 that day?
Engineering company WorleyParsons was the best performer, rising $1.18 (about 4.8%) to $25.70. The worst performer was Iluka, the mineral sands miner, which fell about 3% to $15.26.
How did market heavyweights like BHP Billiton and Rio Tinto move during the rally?
BHP Billiton finished higher—up around 2.3% at $37.29—while Rio Tinto appreciated roughly 1% to $68.90, contributing positively to the market rally.
What happened to commodity prices such as gold during the market move?
Gold slipped slightly at the 5pm close, trading at about US$1,826.61 an ounce, down roughly US$4.47 on Monday’s price.
As an everyday investor, what should I watch for after this China bond speculation-driven rally?
Watch for confirmation and specifics of any Chinese investment—where it would flow and whether it targets bonds or equity stakes—and monitor trading volumes and sector strength (especially energy and bank-exposed names). The article emphasizes cautious optimism: initial reports can move markets, but clear details and follow-through are needed before assuming a lasting impact.
Call 1300 880 160
Start a chat
Schedule a call
