THE local bourse posted its second straight day of gains after a rise on offshore markets sparked hopes for a pick-up in the world economy.
Shares ended near their highest point in four weeks as a growing belief in the health of the US economy sparked a wave of optimism in global markets and trumped concerns over Europe's debt crisis.
"Some analysts are even redirecting their sentiment and encouraging a 'forget Europe, buy US stocks' mentality," CMC Markets trader Andrew May said.
At the close yesterday, the benchmark S&P/ASX 200 index was up 35.3 points, or 0.85 per cent, at 4187.5, while the broader All Ordinaries rose 36.3 points to 4242.9. The March share price index futures contract was up 41 points at 4163 with 25,544 contracts traded.
Yet volumes remained light, with 1.6 billion shares traded at a value of $3.5 billion, as investors remained cautious of committing money to the market ahead of Spanish bond auctions and a European Central Bank policy meeting tonight.
A slump in jobs vacancies data did little to encourage investors, who remain wary over the health of the economy as they mulled the fallout from Europe.
"Over the past six weeks or so we've only seen two days of gains in a row three times so that's a good sign," CommSec analyst Steven Daghlian said. "But we're still seeing investors not keen to lock up too much of their funds at the start of the year and there's a lot of volatility in the market."
BHP Billiton rose 1.5 per cent to $36.18 and Rio Tinto gained 1.6 per cent to $64.19.
Shares in African Iron jumped 40 per cent to 56? after South African miner Exxaro announced plans to buy the Republic of the Congo-focused miner for $338 million.
Santos lagged the energy sector after it said it would shut production from its Mutineer-Exeter oilfield, the latest company to be disrupted by tropical cyclone Heidi.
The financials sector rose 0.7 per cent, with Commonwealth Bank and National Australia Bank both up 0.3 per cent, at $49.94 and $23.57 respectively. The ANZ rose 1.6 per cent to $21.08 and Westpac was the biggest gainer of the big four at $20.63, up 2.1 per cent on the day.
Mr Daghlian said investors would be keeping an eye on earnings from J.P. Morgan in the US tomorrow night, the first of the big US banks to release results. "That could set the tone from the banking sector for the next few weeks," he said.
Among the biggest losers yesterday were the telecoms stocks, which lost 1.7 per cent as investors favoured of riskier assets.
Frequently Asked Questions about this Article…
Why did the ASX rise for a second straight day and what drove the market optimism?
The local bourse rose for a second straight day as growing optimism about the health of the US economy boosted global risk appetite, which outweighed worries about Europe’s debt crisis. Analysts noted a shift toward US stocks and renewed belief in a near-term pick-up in the world economy.
How much did the S&P/ASX 200 and All Ordinaries move on the day?
The benchmark S&P/ASX 200 gained 35.3 points (0.85%) to finish at 4,187.5, while the broader All Ordinaries rose 36.3 points to 4,242.9.
Were trading volumes strong during the rally and should everyday investors be concerned?
Volumes were relatively light — about 1.6 billion shares traded at a value of $3.5 billion — suggesting investors remained cautious. Light volumes can mean moves are less durable, so everyday investors should be mindful of volatility and upcoming events that could change sentiment.
Which major resources stocks led gains and what were their movements?
Major resources stocks rose: BHP Billiton increased about 1.5% and Rio Tinto gained about 1.6% on the day, reflecting the broader positive tone for commodity-related names.
What happened with African Iron and why did its shares jump?
African Iron’s shares jumped about 40% after South African miner Exxaro announced plans to buy the Republic of the Congo–focused miner for $338 million, which drove a sharp positive re-rating of the stock.
How did Santos and the energy sector fare, and what caused the weakness?
Santos lagged the energy sector after saying it would shut production from its Mutineer‑Exeter oilfield because operations were disrupted by tropical cyclone Heidi. That operational disruption weighed on Santos shares relative to the sector.
How did the big four banks perform and what should investors watch in the banking sector?
The financials sector rose 0.7%. Commonwealth Bank and National Australia Bank were up about 0.3% (around $49.94 and $23.57 respectively), ANZ rose about 1.6% to $21.08, and Westpac led the big four with a 2.1% gain to $20.63. Investors were advised to watch upcoming US bank earnings, starting with J.P. Morgan, which could set the tone for the sector.
Are there near-term events investors should monitor that could affect market direction?
Yes. The market was cautious ahead of Spanish bond auctions and a European Central Bank policy meeting. Those European developments, plus US bank earnings (beginning with J.P. Morgan), could influence volatility and market direction in the coming days.
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