Stocks climb back after three-day plunge

AUSTRALIAN shares gained about $33 billion in value yesterday, with the market closing more than 2 per cent higher as positive local economic news raised investor spirits.

By InvestSMART · 8 Sep 2011

By InvestSMART ·
8 Sep 2011

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AUSTRALIAN shares gained about $33 billion in value yesterday, with the market closing more than 2 per cent higher as positive local economic news raised investor spirits.

The S&P/ASX 200 Index closed up 107.9 points, or 2.65per cent, at 4183.4 winning back almost half the 232 points lost in the previous three sessions.

The market climbed sharply at the open, bucking a slump on Wall Street on its first day's trading after the US Labor Day public holiday. It then drifted higher after the Australian Bureau of Statistics announced that the national economy had returned to growth.

Gross domestic product rose 1.2 per cent in the June quarter, after the downturn in the previous quarter due to summer floods and cyclones.

"The GDP figures came in above economists' expectations, which were just lowered the other day after net exports came in, so it gave the market a bit of enthusiasm and we've held gains for most of the day, which is quite encouraging," said Ord Minnett research analyst Ron Cameron.

The market was also experiencing "selling fatigue" after a few straight trading sessions in the red, he said.

"What you're seeing at the moment is that a lot of these dips in the market are opportunities to buy value and we've seen it happen quite a few times . . . the market can't stand it any longer and says 'there's too much value here, we've got to buy again'," he said.

The financial and materials sectors led the pick-up, gaining 2.9 per cent and 2.8 per cent respectively.

The big banks were higher, with National Australia Bank up 80? at $22.94.

Westpac gained 57? to $20.07, Commonwealth put on $1.51 to $47.49 and ANZ rose 77? to $20.03.

Among the miners, BHP Billiton was up $1.35 at $38.23 and Rio Tinto climbed $2.19 higher at $70.60.

Atlas Iron was the best-performing stock, moving up 20?, or 5.7 per cent, to $3.74.

Trading volumes were average as investors awaited firmer direction from US President Barack Obama's speech after the close of Thursday's trading on US markets.

Making news in local trade, shares in investment bank Macquarie Group closed up 37? at $23.53 after it reduced its earnings guidance, saying it expected its first-half profit to decline from a year earlier due to difficult trading conditions and a higher tax rate.

Gold continued its wild gyrations. At the Sydney close, the spot price was $US1838.75 an ounce, down $US67.88. On Tuesday afternoon, it hit a record $US1821.15 an ounce.

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Frequently Asked Questions about this Article…

Why did Australian shares rebound after a three-day plunge and how much did the market gain?

Australian shares rebounded after positive local economic news and a bit of “selling fatigue” following several down sessions. The S&P/ASX 200 closed up 107.9 points (about 2.65%) at 4,183.4, and the market gained roughly $33 billion in value as GDP growth and renewed buying interest lifted investor sentiment.

How did the June-quarter GDP data affect the ASX and investor confidence?

The Australian Bureau of Statistics reported GDP rose 1.2% in the June quarter, beating economists' expectations. That stronger-than-expected GDP print helped lift investor spirits, gave the market enthusiasm, and contributed to the ASX holding gains for most of the day.

Which sectors led the market pick-up on the ASX and what does that mean for everyday investors?

The financials and materials sectors led the pick-up, gaining about 2.9% and 2.8% respectively. For everyday investors, this means bank and mining-related stocks drove much of the rally on that day, reflecting renewed buying interest in those sectors after recent weakness.

How did the major Australian banks perform during the rebound?

The big banks were higher on the rebound. National Australia Bank closed around $22.94, Westpac around $20.07, Commonwealth Bank about $47.49, and ANZ near $20.03, with all recording gains as financial stocks helped lead the market recovery.

What happened with major miners like BHP Billiton and Rio Tinto during the rally?

Miners also climbed: BHP Billiton rose about $1.35 to $38.23 and Rio Tinto climbed about $2.19 to $70.60, contributing to the materials-sector strength that supported the broader market bounce.

Why did Atlas Iron stand out as the best-performing stock that day?

Atlas Iron was the top performer, jumping about 5.7% to $3.74. It led the gains among individual stocks on the day, although the article does not specify a single catalyst beyond the broader market recovery.

How did Macquarie Group’s earnings guidance affect its share price?

Macquarie Group closed higher at about $23.53 despite reducing its earnings guidance. The firm said it expected first-half profit to decline from a year earlier due to difficult trading conditions and a higher tax rate, yet the stock still finished up on the broader market bounce.

What was happening with gold prices and how did that volatility show up in the market?

Gold continued to experience wild gyrations. At the Sydney close the spot price was reported at US$1,838.75 an ounce (down US$67.88), and earlier the metal had hit a record US$1,821.15 an ounce on Tuesday afternoon, illustrating sharp swings in the gold market during that period.