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.

By InvestSMART · 24 Aug 2012

By InvestSMART ·
24 Aug 2012

Comments

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.

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/S&P/ASX 200 end only slightly higher after strong early gains?

The market opened strongly after US Federal Reserve minutes hinted at another round of bond buying, but the rally faded when HSBC’s flash China purchasing managers index showed the factory sector contracting at its fastest pace in nine months, raising concerns about global demand. The benchmark S&P/ASX 200 still finished slightly higher, up 7.7 points (0.2%) to 4,383.7.

How did the US Federal Reserve minutes affect Australian shares and gold prices?

The Fed minutes, which suggested the Fed may quickly launch more bond buying to stimulate the US economy, initially lifted Australian shares and pushed the gold price to its highest level in more than three months. Gold stocks reacted strongly, gaining about 4.1% on the day.

What did the HSBC flash China PMI report show and why did investors react?

HSBC’s flash China purchasing managers index indicated the factory sector contracted this month at the fastest pace in nine months. That weaker-than-expected reading spooked investors because it heightened concerns about the health of global demand, which helped derail the day’s early market rally.

Which sectors were the best performers during the session and what drove them?

Gold stocks were the best-performing sector, rising about 4.1% as the gold price bounced higher after the Fed minutes. Materials also performed well, gaining about 1.2%—supported by strong results and positive reactions to miners such as Fortescue and BHP despite talk that the mining boom had ended.

What happened to Fortescue Metals and why did its shares move?

Fortescue Metals reported a full-year net profit that rose 53% to a record US$1.56 billion. The positive result drove the stock higher—Fortescue gained around 9% to $4.24 on the day.

How did BHP Billiton’s shares perform and what news influenced the move?

BHP advanced to about $33.41 following investor reaction to the company’s recent Olympic Dam announcement. The article notes gains for BHP the day after that announcement helped support the materials sector.

What corporate results affected travel and media stocks, and how did Qantas, Virgin Australia and Fairfax Media fare?

Qantas reported its first full-year net loss since listing in 1995 and said it would cancel orders for 35 aircraft; the stock rose about 2.6% to $1.205 and was the second-best performer on the S&P/ASX 50. Rival Virgin Australia ended the day slightly lower at about 45.5 cents. Fairfax Media reported a $2.73 billion full-year net loss after a major write-down on its mastheads, and its shares tumbled about 9.7%, making it one of the worst performers on the S&P/ASX 200.

What happened with Fairfax shareholder Gina Rinehart after the market close?

After the close, top Fairfax shareholder Gina Rinehart was reported to be looking to further cut her stake by offering to sell 5% of the company at about 50 cents a share.