Rises across the board as cliff recedes

THE sharemarket closed higher on Monday, buoyed by hopes that political leaders in the United States can negotiate a compromise over the looming "fiscal cliff".

By InvestSMART · 20 Nov 2012

By InvestSMART ·
20 Nov 2012

Comments

THE sharemarket closed higher on Monday, buoyed by hopes that political leaders in the United States can negotiate a compromise over the looming "fiscal cliff".

The benchmark S&P/ASX 200 Index added 24.6 points, or 0.6 per cent, to 4361.4, while the broader All Ordinaries gained 22.5 points, or 0.5 per cent, to 4382.6.

The US "fiscal cliff" has been worrying investors for the past few weeks and a meeting of Democrat and Republican leaders on Friday raised hopes an agreement could be reached before automatic tax increases and spending cuts come into effect on January 1.

All sectors on the ASX finished higher, with energy up 2.3 per cent, telecoms, gold and health all rising 1.2 per cent, and materials up 0.6 per cent.

Telstra rose to its highest close in more than four years, adding 1.2 per cent to finish at $4.17.

"The US 'fiscal cliff' has been weighing on investor sentiment for a few weeks, [and now] the Israel-Hamas conflict.

That's prompting a lot of allocation into defensive names. In this sort of environment you typically see rotation into safe haven stocks, and Telstra would certainly apply," said BBY institutional dealer Anson Rosewall.

The big miners were mixed. BHP Billiton jumped nearly 1 per cent to $33.21, while Rio Tinto slipped 0.3 per cent to $56.71. Fortescue dropped 1.3 per cent to $3.85.

Oil and gas producer Santos enjoyed a nice push up after it announced a large discovery of gas off the coast of Western Australia's Kimberley region. Its shares closed up 3.9 per cent at $11.30.

Struggling surfwear retailer Billabong finally found some good news for investors. Paul Naude, the director of its US operations, advised the board that he would be holding talks with possible financiers ahead of a possible leveraged buyout of the company.

"The fundamentals of the business are still struggling," said Mr Rosewall. "While it's good news for the stock, it's a question of how they are going to finance it until we get a bit more clarity about that, investors will still be cautious."

Billabong shares surged 10.1 per cent to 81.5?.

Among the banks, ANZ and Westpac traded relatively flat at $23.56 and $24.40 respectively, while CBA slipped 0.2 per cent to $58.15 and NAB rose 0.7 per cent to $23.36.

US markets will be closed on Thursday and for half a day on Friday for Thanksgiving, which will probably mean a quiet week.

Meanwhile, the dollar closed higher after hitting seven-month highs against the yen during local trading. Late on Monday, the Aussie was trading at US103.67?, up from Friday's close of US103.21?. It rose to Y84.48 against the Japanese yen.

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 ASX rise on Monday and how did the US 'fiscal cliff' affect investor sentiment?

The ASX closed higher after hopes rose that US political leaders could reach a compromise on the looming 'fiscal cliff' before automatic tax increases and spending cuts kick in. That optimism, along with geopolitical concerns such as the Israel–Hamas conflict, improved risk appetite and pushed the S&P/ASX 200 up 24.6 points (0.6%) to 4,361.4 and the All Ordinaries up 22.5 points (0.5%) to 4,382.6.

Which ASX sectors led the gains and what does that mean for everyday investors?

All sectors finished higher: energy rose 2.3%, telecoms, gold and health each gained about 1.2%, and materials were up 0.6%. For everyday investors this shows broad-based market strength on the day, with particular interest in energy names and defensive telecom and healthcare stocks amid geopolitical and macro uncertainty.

What happened to Telstra's share price and why did investors favour it?

Telstra rose 1.2% to close at $4.17 — its highest close in more than four years. Market commentary in the article said investors rotated into defensive, safe-haven stocks given the fiscal cliff uncertainty and international tensions, and Telstra fitted that profile.

How did the big miners perform on the day and what were the key stock movements?

The big miners were mixed: BHP Billiton jumped nearly 1% to $33.21, Rio Tinto slipped 0.3% to $56.71, and Fortescue dropped 1.3% to $3.85. That mixed performance highlights how commodity and miner stocks can move differently even on the same market drivers.

What was the market reaction to Santos' gas discovery off Western Australia?

Santos announced a large gas discovery off the Kimberley coast, and its shares rose 3.9% to $11.30 on the news. For investors, resource-company stock moves can be directly influenced by exploration success announcements.

Why did Billabong shares surge, and should investors see this as a turnaround?

Billabong shares jumped 10.1% to 81.5 after Paul Naude, the director of its US operations, said he would hold talks with potential financiers about a possible leveraged buyout. The article cautioned that the company's fundamentals were still struggling, so while the news was positive, investors were likely to remain cautious until financing and clarity improved.

How did the major Australian banks trade during the session?

Bank trading was relatively subdued: ANZ and Westpac were largely flat at $23.56 and $24.40 respectively, CBA slipped 0.2% to $58.15, and NAB rose 0.7% to $23.36. This suggests a quiet day for the banking sector despite broader market gains.

Will US market holidays and currency moves affect Australian investors this week?

Yes — US markets were set to be closed on Thursday and open half-day Friday for Thanksgiving, which the article said would probably mean a quieter trading week. Currency moves were also relevant: the Australian dollar closed higher at US103.67¢ (up from US103.21¢) and rose to ¥84.48 against the yen after the US dollar hit seven‑month highs versus the yen during local trading.