Positivity buoys stocks

THE sharemarket closed at its highest in 3 months yesterday on positive earnings reports and encouraging commentary from the Reserve Bank.

By InvestSMART · 22 Aug 2012

By InvestSMART ·
22 Aug 2012

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THE sharemarket closed at its highest in 3 months yesterday on positive earnings reports and encouraging commentary from the Reserve Bank.

The benchmark S&P/ASX 200 Index rose 19.1 points, or 0.4 per cent, to 4383.4.

Gains were broad based, with materials rising 0.4 per cent, financials adding 0.3 per cent and energy stocks jumping 1.4 per cent. Consumer staples were among the few losers, dropping 0.3 per cent.

The RBA said in its August 7 board meeting minutes the full effects of previous rate cuts had yet to be felt and there were signs of improved activity in parts of the economy not benefiting from the mining boom.

Investors were also hopeful that the European Central Bank can trim borrowing costs and help restore confidence in the euro bloc.

"We saw the market move towards 4400, and we did touch that, but then rejected it late with a bit of profit-taking," IG Markets market strategist Stan Shamu said. "Around those levels everyone starts thinking, 'Hang on, have we run a bit too far, what's going on, what are the actual drivers?'

"We have European risk kicking in midweek, with quite a few talks going on with Germany, Greece and France. That will probably result in a few comments filtering through markets as the week progresses."

On the local front, engineering company Monadelphous beat expectations with net profit of $137.3 million. Its shares closed up $1.56, or 7.2 per cent, at $23.26.

Rio Tinto lost 9? to $54.41, while BHP Billiton, which will present its earnings today, rose 24? to $33.27.

Westpac dropped 10? to $24.87, Commonwealth Bank was flat at $55.80, National Australian Bank rose 46? to $25.37, and ANZ improved 17? to $24.95.

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Frequently Asked Questions about this Article…

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

The sharemarket rose on positive company earnings and encouraging commentary from the Reserve Bank. Investors were also hopeful the European Central Bank could trim borrowing costs, and broad-based sector gains helped push the S&P/ASX 200 to its highest close in three months.

How much did the S&P/ASX 200 rise and which sectors led the gains?

The benchmark S&P/ASX 200 rose 19.1 points to 4,383.4. Materials climbed 0.4%, financials added 0.3% and energy stocks jumped 1.4%, while consumer staples were among the few laggards, dropping 0.3%.

What did the Reserve Bank (RBA) minutes say and why does it matter to investors?

The RBA said the full effects of previous rate cuts had yet to be felt and noted signs of improved activity in parts of the economy that aren’t benefiting from the mining boom. For investors, that suggests monetary easing effects could still influence economic growth and company earnings in coming months.

What did market strategists say about the recent market rally and what should investors watch?

IG Markets strategist Stan Shamu said the market moved toward 4,400 and briefly touched it before some profit-taking. He highlighted upcoming European risk midweek — talks involving Germany, Greece and France — which could spark further market moves. Investors should watch for profit-taking and European developments.

How did Monadelphous perform and what were its reported earnings?

Engineering group Monadelphous beat expectations with a net profit of $137.3 million. Its shares closed up $1.56, or 7.2%, at $23.26 on the trading day covered by the article.

What happened to major miners Rio Tinto and BHP Billiton in this trading session?

Rio Tinto fell to $54.41, while BHP Billiton rose to $33.27. The article also notes that BHP Billiton was scheduled to present its earnings that day.

How did Australia’s big banks trade on the day and what were their share prices?

Westpac dropped to $24.87, Commonwealth Bank was flat at $55.80, National Australia Bank rose to $25.37, and ANZ improved to $24.95 according to the trading session reported.

What near-term risks and catalysts should everyday investors monitor after this market move?

Based on the article, investors should watch for profit-taking after the rally, European developments and ECB actions that could affect market confidence, upcoming company earnings (such as BHP Billiton’s report), and how the full effects of RBA rate cuts feed through the economy.