The week that just got better and better

THE market has posted its best week in more than a year as money flowed back into stocks on confidence European banks will be strengthened against a possible Greek default.

By InvestSMART · 8 Oct 2011

By InvestSMART ·
8 Oct 2011

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THE market has posted its best week in more than a year as money flowed back into stocks on confidence European banks will be strengthened against a possible Greek default.

The local market closed in the black for the third straight day after details of Europe's plans for the debt crisis were released overnight, including the European Central Bank's measures to help cash-strapped euro-zone banks.

By the close, the benchmark S&P/ASX 200 Index had gained 93 points, or 2.3 per cent, to 4162.9.

The index rose 3.8 per cent in the week, the best performance since early September last year.

Macquarie Private Wealth division director Lucinda Chan said investors were hopeful a Greek default would not lead to a global recession after the Netherlands voted on Thursday to beef up Europe's rescue fund.

CMC Markets head of analysis David Land said the third day of strong buying inspired confidence, but the market was still vulnerable to changes in Europe amid highly volatile conditions.

"When you consider what the futures looked like this morning, the gain today has exceeded all expectation and sees caution being thrown to the wind," he said.

Locally, gains were broad based, with energy stocks rising 3.1 per cent after a surge in oil prices for a second straight day. Woodside Petroleum jumped 2.2 per cent, or 74?, to $35.08, while Santos finished 3.6 per cent, or 42?, higher at $12.02.

Among the miners, BHP Billiton advanced 2.5 per cent, or 90?, to $37.20, while Rio Tinto gained $3.12, or 4.9 per cent, to $66.40. Fortescue Metals gained 35?, or 7.7 per cent, to $4.90.

Financials, which led the US market higher overnight, were also strong, with all the big retail banks gaining ground. National Australia Bank closed the strongest, up 89?, or 3.9 per cent, at $23.76. Investment bank Macquarie Group did even better, rising $1.52, or 6.7 per cent, to $24.06.

Telecoms were among the only stocks to shed value. Gold closed at $US1658, up $US11.60 from Thursday's local close.

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Frequently Asked Questions about this Article…

Why did the ASX 200 have its best week in more than a year?

The ASX 200 rallied as money flowed back into stocks after European leaders and the ECB outlined measures to strengthen banks and address the debt crisis. Confidence was boosted by the Netherlands voting to bolster Europe’s rescue fund, helping the local market close higher for a third straight day and deliver its best weekly gain since early September.

How much did the S&P/ASX 200 gain on the day and over the week?

On the day the S&P/ASX 200 rose 93 points, or 2.3%, to 4,162.9. Over the week the index climbed 3.8%, marking its strongest weekly performance since early September last year.

Which sectors led the market rally and what drove those gains?

Energy and mining stocks led the rally, helped by a second straight day surge in oil prices for the energy sector and broad demand for miners. Financial stocks also rose strongly after gains in the US. Telecoms were among the few sectors to lose value.

How did major energy stocks like Woodside Petroleum and Santos perform?

Woodside Petroleum jumped 2.2% to $35.08, while Santos finished 3.6% higher at $12.02, reflecting the overall 3.1% lift in energy stocks caused by rising oil prices.

What were the moves in major miners such as BHP Billiton, Rio Tinto and Fortescue Metals?

BHP Billiton rose 2.5% to $37.20, Rio Tinto gained $3.12 (4.9%) to $66.40, and Fortescue Metals advanced 7.7% to $4.90, as miners participated in the broad-based market gains.

How did big Australian banks and Macquarie Group perform during the rally?

Financials were strong, with National Australia Bank closing up 3.9% at $23.76. Macquarie Group led gains among investment banks, rising $1.52 or 6.7% to $24.06.

What did analysts say about market risks and volatility after the rally?

Analysts noted renewed confidence but cautioned the market remained vulnerable. Macquarie Private Wealth’s Lucinda Chan said investors hoped a Greek default wouldn’t trigger a global recession, while CMC Markets’ David Land warned that, despite strong buying, market conditions were still highly volatile and sensitive to European developments.

How did gold and commodity prices behave during the market upswing?

Gold closed at US$1,658, up US$11.60 from the previous local close. Commodity moves, including a notable surge in oil prices for a second straight day, helped lift energy stocks and contributed to the broader market rally.