Resources pull market out of the red

THE sharemarket closed slightly higher yesterday in a big turnaround from the previous day as cautious investors were encouraged by better Chinese manufacturing data.

By InvestSMART · 25 Jul 2012

By InvestSMART ·
25 Jul 2012

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THE sharemarket closed slightly higher yesterday in a big turnaround from the previous day as cautious investors were encouraged by better Chinese manufacturing data.

At the close, the S&P/ASX 200 Index was up 4.3 points, or 0.1 per cent, at 4133.2.

The market closed 1.7 per cent lower on Monday amid renewed fears about the European debt crisis and the end of Australia's mining boom.

Lonsec analyst Michael Heffernan said resource stocks pulled the local indices out of the red yesterday after the release of data showing China's manufacturing downturn had bottomed. "That was a spur for the resources sector," Mr Heffernan said. "People are keeping their hands in their pockets and we're still subject to information out of Europe."

While 14 of the top 20 Australian companies were in positive territory, anaemic turnover continued to be a feature of the local market as high-yielding stocks remained in favour.

BHP Billiton gained 38? to $30.93 while Rio Tinto was 24? lower at $51.76. Fortescue Metals Group suffered steep falls in morning trade before regaining ground to close 1? lower at $4.04.

Beleaguered Brazil-focused miner Mirabela Nickel gained 1? to 25? after announcing it remained on track to deliver on its production forecast but would shed several hundred jobs.

Meanwhile, Oil Search says it is close to deciding on partners for its natural gas exploration assets in resource-rich Papua New Guinea, and was 2? higher at $6.60.

In the retail sector, shares in troubled surfwear brand Billabong surged 19.5 per cent to $1.31 after it received a second, but substantially lower, takeover offer from US private equity firm TPG valuing the company at $695 million.

Shares in garage doors, windows and building products maker Alesco were down 2? at $2.01 as it announced a $13.9 million loss for its 2012 financial year. The company is subject to a $210 million takeover bid from DuluxGroup, which finished 3? weaker at $2.97.

Gold closed at $US1577.20 an ounce in Australian trading, up US85? on Monday's close.

National turnover was 1.59 billion securities worth $3.19 billion, with 342 stocks up, 557 down and 370 unchanged.

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Frequently Asked Questions about this Article…

What drove the Australian sharemarket to close slightly higher yesterday?

The S&P/ASX 200 finished a touch up at 4,133.2 after a big turnaround from the previous day. Better-than-expected Chinese manufacturing data suggested the downturn had bottomed, which encouraged cautious investors and gave a lift to resource stocks. Lonsec analyst Michael Heffernan said resources pulled the local indices out of the red, though markets remained sensitive to news from Europe.

How did resource stocks affect market sentiment and should everyday investors pay attention?

Resource stocks were a key driver of the recovery, with investors reacting to signs that China’s manufacturing slowdown may be easing. The article notes resource names helped lift the market, and that high-yielding stocks remained in favour amid anaemic turnover. Everyday investors should watch Chinese demand signals and resource-sector updates because they can have an outsized impact on the ASX.

What happened to BHP Billiton, Rio Tinto and Fortescue Metals Group shares?

BHP Billiton rose to trade at $30.93, while Rio Tinto was lower at $51.76. Fortescue Metals Group plunged sharply in morning trade but recovered some ground to close lower at $4.04. These moves show the sector was mixed even as resources helped lift the market overall.

Why did Mirabela Nickel shares move and what did the company announce?

Mirabela Nickel’s shares rose after the company said it remained on track to meet its production forecast. At the same time it announced it would shed several hundred jobs, a cost-cutting step that investors appeared to factor into the share reaction.

What is the latest on Oil Search and its Papua New Guinea natural gas plans?

Oil Search said it is close to deciding on partners for its natural gas exploration assets in Papua New Guinea. The stock was trading around $6.60 as the company moved toward partner decisions for its PNG resource projects—news that investors typically watch closely for project progress and partnership implications.

Why did Billabong shares surge and what does TPG’s takeover offer mean for investors?

Billabong jumped 19.5% to $1.31 after receiving a second takeover offer from US private equity firm TPG. The offer was substantially lower than earlier proposals but valued the company at $695 million. For investors, takeover activity can drive short-term volatility and re-price the stock based on the perceived value of the offer.

How did Alesco’s results and the DuluxGroup takeover bid affect their share prices?

Alesco announced a $13.9 million loss for the 2012 financial year and its shares were down to $2.01. The company is also the subject of a $210 million takeover bid from DuluxGroup; DuluxGroup’s shares finished weaker at $2.97. Earnings results plus takeover speculation have clearly influenced investor sentiment for both names.

What broader market indicators from the day should everyday investors note?

National turnover was 1.59 billion securities worth $3.19 billion, indicating relatively anaemic trading volumes. Market breadth showed 342 stocks up, 557 down and 370 unchanged. Gold closed at US$1,577.20 an ounce in Australian trading. These metrics point to low turnover and a market still cautious and reactive to external data (China and Europe).