Stocks rally as euro-zone fears recede

THE sharemarket closed stronger yesterday after several positive earnings results and the growing likelihood that euro-zone finance ministers will approve another bailout for Greece.

By InvestSMART · 21 Feb 2012

By InvestSMART ·
21 Feb 2012

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THE sharemarket closed stronger yesterday after several positive earnings results and the growing likelihood that euro-zone finance ministers will approve another bailout for Greece.

The S&P/ASX 200 Index jumped 60.2 points, or 1.4 per cent, to 4256.1.

Resources and financial sectors made strong gains as investors digested corporate earnings results and a positive shift in global sentiment on Europe's debt crisis.

Ord Minnett private client adviser Jon Hancock said confidence was returning after recent announcements from Europe on Greece and the determination of France and Germany to ensure Greece's debt crisis was solved. "It is looking more likely that there will be a positive outcome to [last night's meeting]," he said.

Euro-zone finance ministers met last night to decide whether to grant a ?130 billion ($A159.7 billion) bailout package to Greece that would reduce the country's debts to 120 per cent of gross domestic product by 2020.

Volumes on the sharemarket were buoyed as Commonwealth Bank and Telstra traded ex-dividend, Mr Hancock said.

CBA lost 58?, or 1.2 per cent, to $49.10 despite the payout of a fully franked interim dividend of $1.37 a share. Telstra fell 9?, or 2.6 per cent, to $3.32 after the payment of its fully franked dividend of 14? a share.

Materials heavyweights rallied sharply, with BHP Billiton gaining 82?, or 2.3 per cent, to $36.03, and Rio Tinto up $1.47, or 2.2 per cent, at $68.04.

Oil majors also made good gains, with Santos leading the sector with a jump of 44?, or 3.2 per cent, to $14.

Shares in Australia's largest steel maker, BlueScope Steel, dipped 1? to 36.5? after it posted a $530 million first-half net loss for the half-year to December 31. The result was nearly 10 times larger than the $55 million loss for the same period last year.

Banks and financials climbed, with CBA's rivals adding at least 1.8 per cent to their share price valuations.

Westpac led the big four, finishing up 50?, or 2.5 per cent, higher at $20.65.

Bendigo and Adelaide Bank firmed 12? to $8.14 despite reporting a 67 per cent drop in first-half profit to $57.9 million.

Amcor was rewarded by investors for its 13.9 per cent rise in first-half underlying profit, as the company realised more benefits from its acquisition of Ball Plastics Packaging and Alcan Packaging. The stock surged 27?, or 3.9 per cent, to $7.15.

Spot gold closed up $US2.66 at $US1735.61 an ounce. AAP

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Frequently Asked Questions about this Article…

What caused the S&P/ASX 200 rally on the day covered by the article?

The S&P/ASX 200 jumped 60.2 points (about 1.4%) to 4,256.1 after several positive corporate earnings results and a growing likelihood that euro‑zone finance ministers would approve another bailout for Greece. Improved global sentiment on Europe’s debt crisis helped lift Australian markets.

How did euro‑zone bailout talks for Greece affect Australian investor sentiment?

Euro‑zone finance ministers met to consider a €130 billion bailout package for Greece that aimed to reduce the country’s debt to about 120% of GDP by 2020. That prospect — and public comments from European leaders — produced a positive shift in global sentiment, which in turn boosted confidence among Australian investors and supported gains on the sharemarket.

Which sectors led the gains on the Australian sharemarket that day?

Resources and financial sectors made the strongest gains. Materials heavyweights and miners rallied (BHP Billiton rose about 2.3% to $36.03 and Rio Tinto was up about 2.2% to $68.04), and oil companies also performed well, with Santos jumping roughly 3.2% to $14. Banks and other financials climbed as well.

Why did Commonwealth Bank (CBA) and Telstra shares fall even though they paid dividends?

Both Commonwealth Bank and Telstra traded ex‑dividend, which typically leads to a drop in share price roughly corresponding to the dividend payment. On the day, CBA fell about 1.2% to $49.10 despite a fully franked interim dividend of $1.37 a share, and Telstra fell about 2.6% to $3.32 after paying a fully franked dividend (reported as 14 cents a share).

How did the major banks perform overall, including CBA’s rivals and Westpac?

While CBA dipped after trading ex‑dividend, its rivals generally gained — adding at least about 1.8% to their share price valuations. Westpac led the big four, finishing roughly 2.5% higher at $20.65, helping lift the financial sector on the day.

Which companies reported notable profit moves, and how did investors react?

Amcor reported a 13.9% rise in first‑half underlying profit as it realised benefits from acquisitions (Ball Plastics Packaging and Alcan Packaging), and its stock rose about 3.9% to $7.15. Conversely, BlueScope Steel posted a large first‑half net loss of $530 million — nearly ten times last year’s $55 million loss — and its shares dipped in response.

What happened with regional bank Bendigo and Adelaide Bank’s results and share price?

Bendigo and Adelaide Bank reported a 67% drop in first‑half profit to $57.9 million, yet the stock still firmed to $8.14 on the day, showing investor interest despite the weaker profit result.

What was the movement in commodity prices such as gold on that trading day?

Spot gold closed up US$2.66 at US$1,735.61 an ounce, reflecting a modest rise in the gold price on the day covered by the article.