The sharemarket had a solid run this week, closing just shy of the 4500 points level, after the Reserve Bank's rate cut and rising global commodity prices causing investors to jump into financial and resource stocks.
The benchmark S&P/ASX200 index hit a 14-month record high on Wednesday, and then extended those gains over the following two days, to be up 2.4 per cent for the week. It has now risen for seven days in a row, its longest winning streak since April 2010.
The earlier part of the week had investors reacting to Tuesday's interest rate cut by putting money in high-yielding financial stocks, while yesterday they responded to high commodity prices by embracing resources stocks, which rose nearly 2 per cent.
Gold prices offshore hit nine-month highs of $US1796.50 an ounce on Thursday night.
For the week, the All Ordinaries Index rose 107.5 points, or 2.4 per cent, to 4513.8.
The Australian dollar lost a cent against the greenback through the week, a direct consequence of both the RBA's rate cut of 25 basis points, and disappointing retail sales and building approval figures.
"Those last two numbers were a setback," the Westpac currency strategist Sean Callow said.
"We had a big revision to building approvals, and the details of the retail sales weren't very encouraging. And it was very lop-sided by state, so Western Australia had a big bounce while the rest [of the states] were very lacklustre. That's not what you want to see," he said.
For the week, the big four banks' shares rose after the RBA cut rates.
ANZ gained 75?, or 3 per cent, at $25.50 Commonwealth Bank climbed $1.08, or 2 per cent, to $56.85 National Australia Bank rose 82?, or 3.2 per cent, to $26.31 and Westpac added $1.03, or 4 per cent, at $25.88.
Following the RBA move, NAB and Commonwealth Bank reduced interest rates for their standard variable home loans by 20 basis points yesterday. Westpac later lowered its standard variable rate by 18 basis points. Investors await ANZ's action next week.
Bank of Queensland slipped 3?, to $7.55, after it prepared to post the first full-year loss by an Australian bank in 20 years, thanks to its exposure to the struggling south-east Queensland property market.
Qantas gained 3?, or 2.5 per cent, at $1.25, after it sold its 50 per cent stake in the road freight operator Star Track Express, to Australia Post and then moved to take full ownership of the air freight business Australian air Express. The High Court also ruled against the airline's fight to be exempt from paying $34 million in GST on unused flight bookings.
Macquarie Radio Networks fell 9?, or 14 per cent, to 55?, as the list grew of sponsors pulling out of the broadcaster Alan Jones's radio program following his comments about the late father of the Prime Minister, Julia Gillard.
Arrium Limited jumped 25.5?, or 47 per cent, to 80?, after it said it had rejected an unsolicited $1 billion takeover offer from a consortium of Australian and South Korean companies. It also said it expected total iron ore exports to reach between 8 million tonnes and 9 million tonnes for 2012-13 as port capacity at Whyalla increased from 12 million tonnes to 13 million tonnes.
Frequently Asked Questions about this Article…
What drove the ASX to a seven-day winning streak and near 4,500 points this week?
The market rally was driven mainly by the RBA's 25 basis-point rate cut and rising global commodity prices. Investors rotated into high-yielding financial stocks early in the week after the rate cut, then into resources stocks as commodity prices climbed. The S&P/ASX200 hit a 14-month record high midweek and the All Ordinaries rose 107.5 points (2.4%) for the week.
How did the RBA interest rate cut affect big bank shares and home loan rates?
Big four bank shares rose after the RBA cut: ANZ gained 75 cents (about 3%) to $25.50, Commonwealth Bank climbed $1.08 (2%) to $56.85, NAB rose 82 cents (3.2%) to $26.31 and Westpac added $1.03 (4%) to $25.88. Following the move, NAB and Commonwealth cut standard variable home loan rates by 20 basis points and Westpac lowered its standard variable rate by 18 basis points; investors were awaiting ANZ's action.
What happened to commodity and gold prices and how did that affect resource stocks?
Rising commodity prices lifted resource stocks nearly 2% during the week. Offshore gold prices hit nine-month highs around US$1,796.50 an ounce, which helped support the rally in resource-related shares.
Why did the Australian dollar weaken during the week?
The Australian dollar lost about one cent against the US dollar after the RBA's 25 basis-point cut and disappointing domestic data — notably weaker retail sales and a big revision to building approvals. Currency strategists noted the data looked lop-sided by state, which weighed on the currency.
What corporate moves affected Qantas shares this week?
Qantas shares rose about 3 cents (2.5%) to $1.25 after the airline sold its 50% stake in road freight operator Star Track Express to Australia Post and moved to take full ownership of air freight business Australian Air Express. Separately, the High Court ruled against Qantas in its bid to be exempt from paying A$34 million in GST on unused flight bookings.
Why did Bank of Queensland shares fall and what does that mean for investors?
Bank of Queensland slipped about 3% to $7.55 after warning it was preparing to post the first full-year loss by an Australian bank in 20 years, due to its exposure to the struggling south-east Queensland property market. For investors, this highlighted sector and geographic risk tied to property markets.
What caused Macquarie Radio Networks' share price to drop sharply?
Macquarie Radio Networks fell about 9 cents (14%) to 55 cents after a growing list of sponsors pulled advertising from Alan Jones's radio program following his controversial comments about the late father of Prime Minister Julia Gillard. Sponsor withdrawals hit the broadcaster's revenue outlook.
What news moved Arrium shares and what did the company say about iron ore exports?
Arrium jumped strongly (about 25.5 cents, or 47%, to 80 cents) after rejecting an unsolicited A$1 billion takeover offer from a consortium of Australian and South Korean companies. The company also said it expected total iron ore exports of 8–9 million tonnes for 2012–13 as Whyalla port capacity increased from 12 million to 13 million tonnes.
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