Stocks make bright start to the new year

THE sharemarket broke the three-day losing streak that ended 2011, climbing 1 per cent in the first day of trading for the year.

By InvestSMART · 4 Jan 2012

By InvestSMART ·
4 Jan 2012

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THE sharemarket broke the three-day losing streak that ended 2011, climbing 1 per cent in the first day of trading for the year.

Stocks posted gains across the board after better than expected German manufacturing data helped European markets spread more holiday cheer.

Positive manufacturing data from China over the weekend also helped improve risk appetites, lifting resource and energy stocks.

Burrell Stockbroking adviser Jaime Elgar said the market was poised for a bounce in coming months.

"I expect that in the first quarter or the first half we could see some new lows but we will end this year higher," he said.

"If something does happen [to resolve the debt crisis], I think the market has the propensity to see a bit of a bounce."

At the close, the S&P/ASX 200 Index was up 44.6 points, or 1.1 per cent, at 4101.2.

Materials led the pack higher, putting on 1.6 per cent after a rise in commodity prices overnight. BHP Billiton rose 1.1 per cent to $34.80 and Rio Tinto gained 1.8 per cent to $61.40.

Shares in Gloucester Coal rose 1.2 per cent to $8.70 on reports that it would wait until suitor Yanzhou Coal Mining Co had finished inspecting its books before deciding whether to recommend the Chinese company's $2 billion takeover offer.

Industrials received a boost from Australian Industry Group and PricewaterhouseCoopers data showing the Australian manufacturing sector had moved into positive figures last month.

OneSteel closed up

1.4 per cent at 71? and BlueScope Steel rose 1.2 per cent to 41?.

The big four banks also benefited from the pick-up in sentiment, gaining between 0.7 and 1.7 per cent.

Still, brokers noted that volumes were thin, with much of the "smart money" slang for institutional investors staying on the sidelines.

Investors are likely to remain wary about the outcome of the next round

of euro-zone debt crisis talks in Brussels and the prospect of billions of euros of debt being rolled into the next quarter.

"It will not really be until mid-January at the earliest, as market players and money managers return from their festive season holidays, that we will be able to garner a real assessment of the market's mood," said IG Markets market analyst Cameron Peacock.

Spot gold finished at $US1587.39 an ounce, up $US32.27 from Friday's close, as the US dollar dipped.

The Aussie finished the local session up US1.28? at $US1.0290.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket (ASX) start the new year with gains?

The S&P/ASX 200 climbed about 1.1% (up 44.6 points to 4101.2) as better-than-expected German manufacturing data and positive Chinese manufacturing news boosted global risk appetite. Rising commodity prices also lifted resources and energy stocks, helping the market break a three-day losing streak that ended 2011.

Which sectors led the gains on the ASX and what drove them?

Materials led the market, up around 1.6%, thanks to overnight rises in commodity prices. Industrials were helped by Australian Industry Group and PwC data showing the local manufacturing sector moved into positive territory, while the big four banks also benefited from improved sentiment, gaining between 0.7% and 1.7%.

How did major miners like BHP Billiton and Rio Tinto perform?

BHP Billiton rose about 1.1% to $34.80 and Rio Tinto gained roughly 1.8% to $61.40, reflecting the broader lift in commodity prices and demand-driven optimism for resource stocks.

What’s the latest on Gloucester Coal and the reported Yanzhou takeover approach?

Gloucester Coal shares rose about 1.2% to $8.70 after reports it would wait for suitor Yanzhou Coal Mining Co to finish inspecting its books before deciding whether to recommend the Chinese company's reported $2 billion takeover offer.

Should everyday investors be worried about the euro‑zone debt talks affecting the market?

The article notes investors remained cautious about the outcome of euro‑zone debt crisis talks in Brussels and the prospect of large amounts of debt being rolled into the next quarter. That uncertainty kept some investors on the sidelines, so it’s reasonable for everyday investors to monitor developments and remain mindful of market risk around those talks.

What did brokers and analysts say about the near‑term market outlook?

Burrell Stockbroking adviser Jaime Elgar said the market looked poised for a bounce over coming months but warned there could be new lows in the first quarter or first half before ending the year higher. IG Markets analyst Cameron Peacock added that a clearer read on market sentiment will likely come in mid‑January as market participants return from holidays.

Were trading volumes strong, and what does that mean for investors?

Brokers pointed out that volumes were thin, with much of the “smart money” (institutional investors) staying on the sidelines. Thin volumes can make price moves less reliable, so everyday investors may want to be cautious and look for confirmation as trading activity picks up.

How did commodities and the Australian dollar move on the day?

Spot gold finished at US$1,587.39 an ounce, up US$32.27 from the previous close, as the US dollar dipped. The Australian dollar ended the local session at US$1.0290.