Solid finish after banks get a bounce

THE sharemarket finished firmer as investors sought high-yielding bank stocks following Tuesday's cut in the cash rate.

By InvestSMART · 6 Dec 2012

By InvestSMART ·
6 Dec 2012

Comments

THE sharemarket finished firmer as investors sought high-yielding bank stocks following Tuesday's cut in the cash rate.

At the close, the benchmark S&P/ASX 200 Index was up 16.8 points, or 0.37 per cent, at 4520.4.

RBS Morgans private client adviser Bruce Smith said the market improved, thanks to the banking sector, which closed about 1 per cent higher. "Our market was dragged up by the banks, Suncorp and the likes of Rio Tinto," Mr Smith said. "It follows [Tuesday's] rate cut, as people look to high-yielding banking stocks."

Traders paid little attention to national accounts data showing Australia's economy grew by 0.5 per cent in the September quarter, which was slightly below expectations.

Commonwealth Bank, Westpac and NAB on Wednesday passed on only 20 basis points of the full 25-basis-point RBA cut to the cash rate. ANZ will announce its interest rate decision on December 14.

Commonwealth Bank shares climbed 58? to $61.08, Westpac was up 16? at $25.58, National Australia Bank put on 6? to $24.31 and ANZ added 18? to $24.77. Bancassurer Suncorp finished 23? higher at $9.97.

BHP Billiton added 3? to $34.29 and Rio Tinto rose 94? to 59.35.

The good news for Rio came after freight rail operator Aurizon, formerly known as QR National, extended a Queensland coal haulage contract.

Aurizon, which was up 6? at $3.63, will transport up to 12 million tonnes of coal a year from Rio Tinto's Clermont mine to the Dalrymple Bay coal terminal in Queensland for 10 years from next July.

Ten Network shares have gone into a trading halt - having last traded at 32.5? - as the struggling free-to-air television broadcaster prepared to raise new funds.

Sundance Resources shares fell 11.5 per cent, or 4.5?, to 34.5? after suitor Hanlong Mining delayed a takeover deal this week.

National turnover was 1.89 billion securities worth $3.6 billion.

The dollar was trading higher at $US104.74?, up from $US104.38?.

Meanwhile, bond futures prices were steady after national accounts data showed economic growth had slowed.

JPMorgan interest rate strategist Sally Auld said the market was waiting for developments in negotiations between US politicians trying to avoid the fiscal cliff of tax rises and spending cuts due to apply automatically next year.

"I think everyone's focus is really on the fiscal cliff and the probability of whether that gets resolved or not as we head towards Christmas," she said.

The December 10-year bond futures contract was at 96.900, and the three-year contract was at 97.380, both unchanged.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

How did the ASX 200 finish after the RBA cash rate cut and why did the market lift?

The S&P/ASX 200 finished firmer, up 16.8 points (about 0.37%) at 4520.4 as investors rotated into high‑yielding bank stocks after the Reserve Bank cut the cash rate. The banking sector’s gains helped lift the wider market.

Which major banks led the rally and what were their share prices at close?

Commonwealth Bank, Westpac, National Australia Bank and ANZ were among the banks that rose, helping drive the market higher. At the close Commonwealth Bank was trading at $61.08, Westpac at $25.58, NAB at $24.31 and ANZ at $24.77, while bancassurer Suncorp also finished higher.

Did the big banks pass the RBA rate cut on to customers?

Commonwealth Bank, Westpac and NAB passed on only 20 basis points of the full 25‑basis‑point RBA cut to their rates. ANZ had not yet announced a decision at the time and was scheduled to make an interest‑rate decision on December 14.

What drove gains in the mining stocks like Rio Tinto and BHP?

Rio Tinto and BHP both climbed after firm‑specific news and market momentum. Rio Tinto’s lift followed Aurizon extending a Queensland coal haulage contract to carry up to 12 million tonnes a year from Rio’s Clermont mine to Dalrymple Bay for 10 years starting next July. BHP also added ground during the session.

Why was Ten Network placed in a trading halt and what happened to Sundance Resources?

Ten Network went into a trading halt as the struggling free‑to‑air broadcaster prepared to raise new funds (it had last traded at about 32.5 cents). Sundance Resources shares fell after suitor Hanlong Mining delayed a takeover deal.

How did Australian economic data and global political risks influence trading?

Traders largely shrugged off national accounts showing Australia’s economy grew 0.5% in the September quarter (slightly below expectations). Market attention was instead focused on global political risks such as US negotiations over the fiscal cliff, a point noted by JPMorgan strategist Sally Auld.

What happened to bond futures and the Australian dollar during the session?

Bond futures were steady, with the December 10‑year contract at 96.900 and the three‑year at 97.380 (unchanged). The Australian dollar was trading a touch higher at about US104.74 cents, up from around US104.38 cents.

What practical takeaways should everyday investors get from this market update?

Key takeaways: bank stocks can outperform after an RBA rate cut, but check whether banks pass reductions on to customers; company‑specific news (like Aurizon’s coal contract or takeover delays) can move resource and small‑cap stocks sharply; and macro or political risks (for example the US fiscal cliff) can influence sentiment even when local economic data is mixed.