Stocks rally after four days of losses

THE sharemarket finished higher yesterday, breaking a four-day losing streak, as Europe's leaders prepared to meet in Brussels today for a crucial round of talks on the region's debt crisis.

By InvestSMART · 28 Jun 2012

By InvestSMART ·
28 Jun 2012

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THE sharemarket finished higher yesterday, breaking a four-day losing streak, as Europe's leaders prepared to meet in Brussels today for a crucial round of talks on the region's debt crisis.

But in a sign that investors remained uneasy, the biggest percentage gains came from the property trust, consumer staples, and telecommunication sectors the homes of defensive stocks.

The benchmark S&P/ASX 200 Index gained 29.9 points, or 0.75 per cent, to 4043.2.

Just $3.55 billion worth of shares changed hands, the thin volumes a sign that investors were expecting little to be achieved at the Brussels talks.

"Markets are waiting for nothing to happen," said UBS's Paul Donovan. "Expectations have been lowered so much that it is just possible that markets react positively to any decision. Alternatively, markets look at the broken structure of the euro and ask 'is that it?' "

The dollar closed at US100.55?, up from US100.24?, despite poor price action in Spanish and Italian bond markets on Tuesday night.

"We had terrible price action in Spanish and Italian bond markets . . . but the euro's held up, and the Australian dollar is actually a little bit higher," said senior Westpac currency strategist Sean Callow.

"The dollar's performed reasonably well given the lack of positive news flow from the eurozone."

In a further sign of troubled times in Europe, Finland sold 30-year bonds for the first time on Tuesday, a day after Cyprus became the fifth country to ask for a bailout from European authorities.

Finland, which is one of only four countries in Europe to be rated AAA by the three big rating agencies, sold ?1.5 billion of bonds after offering a yield of 2.648 per cent. The yield on the German 30-year bond is 2.33 per cent while the US long-bond yield is 2.68 per cent.

Investors cheered News Corp's plans to split its publishing assets from its more profitable entertainment business, with News shares rising 71? to $21.50.

Crown was steady at $8.58 after reports that chairman James Packer was considering a joint venture to establish a casino in the Philippines.

The big banks all moved higher. NAB rose 24? to $23.38, ANZ 24? to $21.54, Commonwealth 45? to $52.15 and Westpac 25? to $20.92.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket rally after four days of losses?

The market rose as Europe’s leaders prepared to meet in Brussels to discuss the eurozone debt crisis, and lowered expectations meant any progress could be greeted positively. Defensive sectors—property trusts, consumer staples and telecommunications—also posted the biggest percentage gains, showing investor caution despite the overall lift.

How did the S&P/ASX 200 perform and was trading active?

The S&P/ASX 200 gained 29.9 points (about 0.75%) to finish at 4,043.2. Trading volumes were thin, with only $3.55 billion worth of shares changing hands, which the article says signaled investors expected little to be achieved at the Brussels talks.

Which sectors led the gains and what does that mean for everyday investors?

Property trusts, consumer staples and telecommunications led the percentage gains. Those are typically defensive areas of the market, suggesting investors were still cautious and favouring companies seen as more resilient in uncertain macro conditions.

What happened with currency and European bond markets that affected sentiment?

The article notes poor price action in Spanish and Italian bond markets, but the euro held up and the Australian dollar was a little higher. Finland sold 30-year bonds for the first time, raising 1.5 billion at a 2.648% yield, while German 30-year yields were 2.33% and the US long-bond yield about 2.68%—a reminder that European sovereign debt concerns were influencing markets.

How did News Corp shares react to corporate news and why did investors cheer?

Investors cheered News Corp’s plan to split its publishing assets from its entertainment business, and News Corp shares rose to $21.50 on the news—reflecting positive market reaction to the planned separation of businesses.

What was the market reaction to Crown and news about James Packer?

Crown was steady at $8.58 after reports that chairman James Packer was considering a joint venture to establish a casino in the Philippines. The article presents the report as background for Crown’s stable share price that day.

How did the big Australian banks perform on the day?

The major banks moved higher: NAB rose to $23.38, ANZ to $21.54, Commonwealth Bank to $52.15 and Westpac to $20.92, according to the article’s closing prices.

What key event were investors watching that could influence markets next?

Investors were focused on the crucial Brussels talks among European leaders about the region’s debt crisis. Market commentators in the article suggested expectations were low, so any constructive decision—or continued signs of structural eurozone weakness—could drive market moves.