Resilient market continues to make gains

FURTHER promising news on the US economy, and a stay of proceedings for the Greek debt spectacle, gave investors enough confidence to put more money into the sharemarket than they removed this week.

By InvestSMART · 17 Mar 2012

By InvestSMART ·
17 Mar 2012

Comments

FURTHER promising news on the US economy, and a stay of proceedings for the Greek debt spectacle, gave investors enough confidence to put more money into the sharemarket than they removed this week.

Warnings from China's outgoing Premier, Wen Jiabao, that prices in the property market were far from "reasonable" provided the week's biggest downer, igniting fears of a slowdown in the world's third-biggest economy.

Large falls in commodity prices only added to concerns, particularly for local resource stocks. But the market was resilient enough to withstand the fears, and it ended the week higher overall.

For the week, the benchmark S&P/ASX 200 Index rose 64.2 points, or 1.5 per cent, to 4276.2.

More positive jobs data from the US provided further signs this week of a genuine pick-up in economic activity, which cheered investors.

The news helped to extend a rally on the US market the Dow Jones rallied for seven straight days, adding 3.5 per cent and to strengthen the greenback against the local currency, if momentarily.

"It tells us that the momentum of the US recovery is continuing, it's looking like becoming self-sustaining," NAB chief economist Rob Henderson said.

"A big drag on the US job market in the last year or so has been job shedding at state and local government levels . . . but it appears like that's coming to an end."

Meanwhile, investors seemed to lack enthusiasm for news that Greece's second bailout package had finally been settled, and that the European Financial Stability Facility would give the stricken country ?39.4 billion ($A49 billion).

After months of angst, when it came time for European officials to shake hands, investors' attention was instead focused on China, with local resource stocks becoming minor casualties of fears about Chinese growth.

Over the week, the banking sector performed better than the general market, up 2.3 per cent. Westpac led the majors, up 2.1 per cent, with Commonwealth Bank up 1.8 per cent.

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 Australian sharemarket (S&P/ASX 200) finish the week higher?

The market rose as promising US economic news and a pause in the Greek debt drama boosted investor confidence. Despite worries from China about the property market and large falls in commodity prices, the benchmark S&P/ASX 200 gained 64.2 points (about 1.5%) to finish at 4,276.2 for the week.

How did US jobs data and the Dow Jones rally affect investor sentiment?

Stronger US jobs data helped reinforce signs of a pickup in economic activity, which extended a US market rally — the Dow Jones rose for seven straight days and added about 3.5% over the period. That positive momentum cheered global investors and supported risk appetite.

What was the market impact of warnings from China’s outgoing premier about the property market?

Warnings from Wen Jiabao that property prices in China were 'far from reasonable' were the week’s biggest downer. Those comments raised fears of slower Chinese growth and hit local resource stocks in Australia, as investors worried about demand for commodities.

How did falling commodity prices influence Australian resource stocks?

Large falls in commodity prices added to concerns about the resources sector. The article notes local resource stocks became 'minor casualties' as commodity weakness and China growth worries weighed on that segment.

Did the announcement of Greece’s second bailout calm markets?

Although European officials agreed a second bailout and the European Financial Stability Facility would provide about €39.4 billion (A$49 billion), investors showed little enthusiasm. After months of angst, attention quickly shifted back to China and commodity concerns rather than celebrating the bailout news.

How did the Australian banking sector perform during the week?

The banking sector outperformed the broader market, rising about 2.3% for the week. Westpac led the major banks with a gain of around 2.1%, while Commonwealth Bank was up about 1.8%.

Was the Australian dollar affected by recent market moves?

Yes — the US rally and stronger US jobs data helped strengthen the US dollar (the greenback) against the local currency, at least momentarily, according to the article.

What key developments should everyday investors watch after this week’s market moves?

Investors should keep an eye on further US economic data (especially jobs reports), China property-market signals from officials, commodity-price trends, and any new developments in Europe related to sovereign support. These factors drove the recent market moves and are likely to influence sentiment going forward.