Spooked investors bring end to rally

THE sharemarket ended slightly higher yesterday, pulling back from early highs after a weak reading from a survey of Chinese manufacturing activity spooked investors.

THE sharemarket ended slightly higher yesterday, pulling back from early highs after a weak reading from a survey of Chinese manufacturing activity spooked investors.

The benchmark S&P/ASX 200 Index gained 7.7 points, or 0.2 per cent, to 4383.7, well off the day's high at 4403.9.

Stocks opened strongly higher after minutes from the US Federal Reserve's last meeting, which hinted at swiftly launching another round of bond buying to stimulate the struggling US economy.

But the rally fast ran out of steam after HSBC's flash China purchasing managers index showed the factory sector contracting this month at its fastest pace in nine months, raising fresh concerns about the health of global demand.

Gold stocks were the best-performing sector, gaining 4.1 per cent after the gold price bounced to its highest in more than three months in the wake of the Fed's minutes.

Materials also performed well, gaining 1.2 per cent despite talk by politicians that the mining boom had ended.

Lonsec senior client adviser Michael Heffernan noted the positive reaction to Fortescue Metals' full-year profit, as well as gains for BHP Billiton the day after its Olympic Dam announcement.

"The iron ore sector, despite some price softness, is doing very well," Mr Heffernan said.

Fortescue gained 9? to $4.24 after the miner said full-year net profit rose 53 per cent to a record $US1.56 billion, while BHP advanced 25? to $33.41.

Qantas reported its first full-year net loss since listing on the exchange in 1995 and said it would cancel orders for 35 aircraft to cut costs. The stock finished up 3?, or 2.6 per cent, at $1.205 and was the second-best performer on the S&P/ASX 50, while rival Virgin Australia ended the day down half a cent at 45.5?.

Investors punished Fairfax Media after the company reported a $2.73 billion full-year net loss as the company took a major write-down on the value of its mastheads.

The diversified publishing house was the second-worst performer on the S&P/ASX 200, tumbling 9.7 per cent, or 5.5?, to 51?.

In news that came after the close of trade, top Fairfax shareholder Gina Rinehart was looking to further cut her stake, offering to sell 5 per cent of the company at 50? a share.

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