Resource gains paint a positive picture

THE sharemarket edged into positive territory yesterday with strong gains in resources.

By InvestSMART · 7 Jul 2011

By InvestSMART ·
7 Jul 2011

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THE sharemarket edged into positive territory yesterday with strong gains in resources.

Steel stocks were among the best performers but the major banks lost ground.

The benchmark S&P/ASX 200 Index finished the session up 6.9 points, or 0.15 per cent, at 4605.

NAB chief economist - markets Rob Henderson said the market produced a "mixed picture" yesterday. Financials shed 0.06 per cent while materials rose 0.70 per cent.

Mr Henderson said increases in commodities prices had boosted resources equities, but the financial sector lost ground because interest rates were left unchanged for at least another month.

"I think it might be a delayed reaction to the Reserve Bank decision to leave rates on hold," he said. "The market seems to believe that the banks make more money when interest rates are up."

CommSec market analyst Juliette Saly said economic problems in Portugal contributed to concerns in the Australian market.

Ratings agency Moody's downgraded Portugal's government debt on Tuesday, citing growing risks the country will require a second rescue package because it cannot meet its debt reduction targets.

Moody's cut Portugal's rating from to Baa2 from Baa1. It said the country would probably require more financial aid on top of the ?78 billion ($A105 billion) bailout it received earlier this year with private banks taking some losses.

The agency's report is a blow to Portugal as it tries to distance itself from Greece, which has implemented painful austerity measures because it did not meet debt reduction targets.

Moody's said Portugal faced huge challenges in reducing spending and tax evasion, achieving economic growth and supporting the banking system.

Mr Henderson said investors would be watching what impact US jobs data, due out tomorrow, would have on the Australian market. Weak employment figures in the US non-farm payroll data could have a negative effect.

Ms Saly said small volumes of shares were traded yesterday. People nervous about getting into the market might hold back until the US data was released, she said.

National Australia Bank lost 18? to $24.96, Commonwealth Bank shed 31? to $51.47, Westpac dropped 8? to $21.89 and ANZ slipped 8? to $21.85.

BlueScope Steel was 8? higher at $1.385 while OneSteel gained 12?, or 6.22 per cent, to $2.05 yesterday.

BHP Billiton gained 22? to $44.45 and Rio Tinto rose 28? to $83.60.

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Frequently Asked Questions about this Article…

How did the S&P/ASX 200 perform yesterday and what does that mean for investors?

The benchmark S&P/ASX 200 finished up 6.9 points (0.15%) at 4605, so the market nudged into positive territory. That small gain, described as a “mixed picture” by NAB’s chief economist, suggests pockets of strength (notably resources) alongside weakness in other sectors—so investors should watch sector-level moves rather than only the headline index.

Why were resource and steel stocks leading gains on the ASX?

Resources and steel stocks outperformed after increases in commodity prices boosted resources equities. The article highlights steel names and major miners as top performers, reflecting investor interest in companies benefitting from stronger commodity markets.

What happened to major bank shares and why did bank stocks lose ground?

Major banks lost ground despite the broader market rise. National Australia Bank, Commonwealth Bank, Westpac and ANZ all fell to lower prices on the day. NAB’s chief economist said the financial sector weakened because interest rates were left unchanged, and the market often expects banks to earn more when rates move higher.

Which specific resource and steel companies showed notable price moves?

The article notes BlueScope Steel traded at $1.385, OneSteel rose to $2.05 (a 6.22% gain), BHP Billiton traded at $44.45 and Rio Tinto at $83.60—all recording gains on the trading day described.

How did international news, like Moody’s downgrade of Portugal, affect Australian markets?

CommSec said economic problems in Portugal added to market concerns. Moody’s downgraded Portugal’s government debt from Baa1 to Baa2 and warned the country may need further financial aid, which contributed to risk‑off sentiment that weighed somewhat on Australian financials and overall investor confidence.

Should everyday investors be paying attention to upcoming US jobs data?

Yes. NAB’s Rob Henderson flagged US non‑farm payrolls as a key data point due the next day—weak US employment figures could have a negative spillover effect on Australian markets, so investors often monitor US jobs data for potential market reactions.

Were trading volumes high or low, and how might that influence trading decisions?

Trading volumes were small on the day covered by the article. CommSec’s market analyst said nervous investors may have held back ahead of US data, so lighter volumes can mean bigger price moves on lower liquidity—an important consideration for everyday investors when entering or exiting positions.

What does the article say about sector performance overall: materials versus financials?

Materials (resources) rose about 0.70% while financials shed roughly 0.06%, illustrating the day’s split performance. The term “mixed picture” captures that resource strength was offset by weakness in the banking and financial sector, driven in part by interest rate expectations.