Miners lift market to 15-month high

THE sharemarket closed at a 15-month high yesterday, buoyed by miners following a rise in commodity prices and a boost in sentiment after Spain avoided a credit downgrade.

By InvestSMART · 18 Oct 2012

By InvestSMART ·
18 Oct 2012

Comments

THE sharemarket closed at a 15-month high yesterday, buoyed by miners following a rise in commodity prices and a boost in sentiment after Spain avoided a credit downgrade.

The benchmark S&P/ASX 200 jumped 36.7 points, or 0.8 per cent, to 4528.2.

Among the sectors, mining stocks led the way, gaining 1.6 per cent, financials added 0.5 per cent, industrials were 1.5 per cent higher and energy rose 0.9 per cent. Consumer staples bucked the trend, falling 0.2 per cent.

The market got an early boost after credit rating agency Moody's held Spain's debt rating at Baa3, just above junk status.

"Europe really got a bolt, on both the affirmation of Spain's ratings and the fact that the Germans may be a little more lenient with some of their enforcement of the rules and regulations, probably relaxing a little bit ahead of an election," said Suncorp Bank analyst Darryl Conroy.

The miners enjoyed a rebound, with BHP saying it would press ahead with plans to increase iron ore output despite the price weakening. BHP gained 1.1 per cent to $33.45, while Rio Tinto added 1.7 per cent to $56.05. Fortescue jumped 5.7 per cent to $4.07.

Gold was trading around $US1751 an ounce. Australia's biggest goldminer, Newcrest, rose 1.1 per cent to $27.62.

The dollar pushed over the US103? mark, buying US103.1? in late trade, giving the Reserve Bank more incentive to cut interest rates again next month.

"[We're] still very aggressively priced in for rate cuts it has us sneaking under 2.5 per cent by June next year, which is a pretty hectic speed for cuts," Mr Conroy said.

"[But] I don't see these eventuating, I expect the journey to be a bit slower. There are still a couple of positives out there."

The banks performed reasonably. ANZ added 0.7 per cent to $25.96, Westpac also rose 0.7 per cent, to $25.89, NAB jumped 0.6 per cent to $26.79, while CBA fell 0.2 per cent to $56.99.

Of the worst 10 performers on the ASX 200, three were media stocks after several brokers downgraded the sector.

Ten Network lost 7.5 per cent to 31?, Fairfax Media fell 5.1 per cent to a new low of 37.5? and APN News & Media slipped 4 per cent to 26.5?.

"It's a tough road with the shifting of the sands for [the media sector] and it's probably going to experience it for some time to come," Mr Conroy said. "Channel Nine has highlighted a few risks for that sector more broadly."

It wasn't all bad news for the sector, with News Ltd shares adding 1.1 per cent to $24.54 after Rupert Murdoch beat a protest vote over his dual role as chairman and chief executive at News' AGM in the US.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

Why did the ASX 200 close at a 15-month high?

The S&P/ASX 200 rose 36.7 points (0.8%) to 4,528.2, driven mainly by a rebound in miners after commodity prices improved and a boost to sentiment when Moody's held Spain's credit rating at Baa3. Strength across mining, financials, industrials and energy lifted the market overall.

What drove miner gains and how did major miners perform?

Miners led the market, with the sector up about 1.6%. BHP gained 1.1% to $33.45 and said it will press ahead with plans to increase iron‑ore output despite weaker prices. Rio Tinto rose 1.7% to $56.05 and Fortescue jumped 5.7% to $4.07, reflecting a wider rebound in commodity‑linked stocks.

How did gold and gold miners react and what does the gold price mean for investors?

Gold traded around US$1,751 an ounce during the session, and Australia's biggest gold miner Newcrest rose 1.1% to $27.62. A higher gold price generally helps gold producers' revenues and can support share prices for companies like Newcrest.

How did major banks perform and what were the notable price moves?

Banks performed reasonably: ANZ added 0.7% to $25.96, Westpac rose 0.7% to $25.89, NAB jumped 0.6% to $26.79, while CBA slipped 0.2% to $56.99. The article notes the sector was steady rather than a major driver of the day's gains.

What impact did Spain's credit rating decision have on markets?

Moody's affirmation of Spain's rating at Baa3 (just above junk) gave European markets a lift and helped Australian sentiment. Suncorp Bank analyst Darryl Conroy said the decision, along with signs Europe may ease enforcement ahead of an election, provided a positive 'bolt' to markets.

What did the article say about the Australian dollar and interest‑rate expectations?

The Australian dollar pushed over the US103 mark, buying about US103.1 in late trade. That strength can give the Reserve Bank more incentive to consider rate cuts, and markets were pricing in aggressive cuts — though the article quotes Darryl Conroy expecting the actual pace of cuts to be slower than currently priced in.

Why did media stocks underperform and which companies were hit?

Several brokers downgraded the media sector, leaving three media stocks among the worst performers on the ASX 200. Ten Network lost 7.5% to 31¢, Fairfax Media fell 5.1% to a new low of 37.5¢, and APN News & Media slipped 4% to 26.5¢. The sector faces ongoing structural risks, though News Ltd was an exception, rising 1.1% to $24.54 after Rupert Murdoch defeated a protest vote at News' AGM.

What practical takeaways should everyday investors consider from this market update?

The article highlights that commodity prices, currency moves and credit‑rating news can quickly sway the ASX 200. Everyday investors may want to monitor commodity trends (iron ore, gold), currency strength, and interest‑rate expectations, plus sector‑specific risks such as the challenges facing media companies. This information can help with portfolio awareness, though any changes should reflect your own goals and risk tolerance.