Shares rally on US sales, Europe hopes

THE sharemarket ended its six-trading-day losing streak with firm gains yesterday as hopes mounted that European leaders were closer to finding a solution to the region's debt crisis. Strong US Thanksgiving sales also boosted the local market.

By InvestSMART · 29 Nov 2011

By InvestSMART ·
29 Nov 2011

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IG Markets market strategist Stan Shamu warned that it could just be a relief rally in what would prove to be a prolonged bear market.

After hitting a seven-week low on Friday, the S&P/ASX 200 Index rebounded to close up 73.9 points, or 1.85 per cent, at 4058.2.

Mr Shamu said a report in the Italian newspaper La Stampa suggesting the International Monetary Fund could offer Italy financial aid also boosted investor sentiment, although some analysts said the fund did not have such resources.

US Thanksgiving retail sales topped estimates, marking a strong start to the Christmas trading season, boosting Australian and Asian markets.

"The financial and materials heavyweights are leading the charge," Mr Shamu said. "However, volume remains thin, suggesting some investors are wary of the potential for the European debt crisis to eclipse strong US Thanksgiving sales."

National Australia Bank was the strongest of the major banks, up 92?, or 4.2 per cent, at $22.74. Westpac jumped 76?, or 3.9 per cent, to $20.26, Commonwealth Bank added $1.50, or 3.3 per cent, to $46.89, and ANZ put on 43?, or 2.3 per cent, to $19.20.

Among the industrials, Transurban Group added 15? to $5.47, while Brambles gained 13? to $6.84.

Qantas forecast a fall in first-half underlying profit by as much as 66 per cent because of higher fuel costs and industrial disputes. It finished up 5? at $1.505.

Rio Tinto said market sentiment had worsened because of Europe's debt woes and economic weakness in the US. It advanced $1.32 to $63.27.

During a teleconference, BHP Billiton chief executive Marius Kloppers said the European debt crisis was hampering trade finance. BHP climbed 80?, or 2.4 per cent, to $34.85.

Rare-earths miner Lynas Corporation was the best performer on the S&P/ASX 50 Index, up 6.8 per cent at $1.175. The worst performer was Woodside Petroleum, following the downgrade of its 2012 oil and gas production targets on Friday. It fell 76? to $32.60.

The spot gold price in Sydney was $US1706 an ounce, up $US19.67 from Friday.

National turnover was 1.89 billion shares worth $4.14 billion, with 565 stocks up, 439 down and 350 steady.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket rebound after a six-day losing streak?

The S&P/ASX 200 bounced back after hopes that European leaders were closer to resolving the region’s debt crisis and stronger-than-expected US Thanksgiving retail sales boosted market sentiment. The index rose 73.9 points (about 1.85%) to 4,058.2, though market strategists warned the move could be a short-lived relief rally.

How did news about the European debt crisis influence ASX trading?

A report suggesting the IMF might offer financial aid to Italy lifted investor confidence, and comments from executives — including BHP Billiton’s CEO saying the crisis was hampering trade finance — kept Europe squarely on traders’ radars. While the headlines helped drive gains, some analysts remained skeptical about the IMF’s capacity, leaving investors cautious.

What impact did US Thanksgiving retail sales have on Australian and Asian markets?

US Thanksgiving retail sales topped estimates and signalled a stronger start to the Christmas trading season, which supported risk appetite across Asian markets, including Australia. That US consumer strength helped lift local stocks alongside Europe-related optimism.

Which bank and financial stocks led the gains on the ASX that day?

Financial stocks were among the leaders. National Australia Bank was the strongest major bank, trading at $22.74, Westpac rose to $20.26, Commonwealth Bank reached $46.89 and ANZ traded at $19.20 — all posting solid gains during the rally.

How did miners and industrials perform during the market rally?

Miners and industrials participated in the advance. Rio Tinto added $1.32 to trade at $63.27, and BHP Billiton rose to $34.85 after management comments about trade finance. Industrial names such as Transurban and Brambles also moved higher, contributing to the broader market lift.

Which companies were the best and worst performers on the ASX 50 that day?

Rare-earths miner Lynas Corporation was the best performer on the S&P/ASX 50, up 6.8% to $1.175. The worst performer was Woodside Petroleum, which fell to $32.60 after the company downgraded its 2012 oil and gas production targets.

What did Qantas say about profits and how did its share price react?

Qantas forecast a fall in first-half underlying profit of as much as 66%, citing higher fuel costs and industrial disputes. Despite the weak profit outlook, its shares actually finished higher, up 5% at $1.505 on the day.

What was the market turnover and why does thin trading volume matter to everyday investors?

National turnover was 1.89 billion shares worth $4.14 billion, with 565 stocks up, 439 down and 350 steady. However, commentators noted trading volume remained thin. Thin volume can mean moves are less robust — a rally on light trading may be harder to sustain and can increase volatility, so investors should be cautious about reading too much into a single-day bounce.