Ups and downs, but bourse on course

STOCKS inched up to their highest close in 14 months yesterday, but the market shed much of its initial optimism as investors lost faith in an imminent Spanish bailout request.

By InvestSMART · 4 Oct 2012

By InvestSMART ·
4 Oct 2012

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STOCKS inched up to their highest close in 14 months yesterday, but the market shed much of its initial optimism as investors lost faith in an imminent Spanish bailout request.

Shareholders also had to make sense of a confusing trade balance a figure that appeared far worse than it was, thanks to a major data revision by the Bureau of Statistics.

But overall, despite a positive start and some lost ground through the day, the bourse still managed to extend Tuesday's gains.

The benchmark S&P/ASX 200 Index rose 5.6 points, or 0.1 per cent, to 4438.6, its highest close since August 2 last year.

Shareholders had been betting that Spain's government was close to asking European authorities for financial help, but reports overnight suggested otherwise.

Then new figures showed Australia recorded a trade deficit of more than $2 billion in August, which blasted clear of the expected $685 million deficit.

But analysts said the deficit was not as bad as it looked: an ABS data revision meant $1 billion was unexpectedly added to the previous month's deficit, which then carried over to August. But news of the actual figure increased pressure on the dollar, which had already been hit by the Reserve Bank's decision to cut the cash rate by 25 basis points on Tuesday.

This added to speculation that it would soon have to lower rates again to cushion the impact of slowing global growth. The dollar was struggling to hold above $US1.02 in late trade yesterday.

"Overall, the number may be shocking, but we don't think it's bad enough to prompt a rethink of the monetary policy outlook," TD Securities Asia-Pacific macro strategist, Alvin Pontoh, said.

"At the margin, though, the poor tone of today's report increases the chance that the RBA follows up next month with another 25 basis points rate cut to 3 per cent, bringing the cash rate back to 2009 lows."

The four big banks gave up some gains to close mixed and were yet to announce their responses to the RBA move.

ANZ was up 6? at $25.05, CBA shed 4? to $56, NAB was 14? higher at $25.95 and Westpac was flat at $25.16.

Meanwhile, APN News and Media slipped 1.5?, or 3.5 per cent, to 41.5?, after the company confirmed it was still reviewing its New Zealand print assets. Speculation that a buyer had been found fuelled a surge in its share price.

Boart Longyear rose 1.5? to $1.67 after the world's largest drilling company shocked the market by sacking its chief executive, Craig Kipp, as it tried to tackle its plunging share price, which is more than 30 per cent weaker in the past month.

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Frequently Asked Questions about this Article…

What drove the S&P/ASX 200 higher and how high did the market close?

The S&P/ASX 200 rose 5.6 points to 4,438.6, its highest close in 14 months (the strongest since August 2 last year). Early optimism pushed gains, although the market lost some momentum later in the day as investors digested a confusing trade report and fading hopes of an imminent Spanish bailout.

How did Spanish bailout speculation affect Australian stocks?

Sharemarket optimism was partly driven by bets that Spain might seek European financial help. Overnight reports suggesting that was unlikely removed some of that optimism and contributed to the market giving back some early gains.

What did the August trade deficit report say and why did analysts call it misleading?

Australia recorded a trade deficit of more than $2 billion in August versus an expected $685 million shortfall. Analysts said the figure looked worse than it really was because the ABS unexpectedly added about $1 billion to the previous month’s deficit in a data revision, which carried through to August.

How did the RBA cash rate cut influence markets and the Australian dollar?

The Reserve Bank’s 25 basis-point cash rate cut earlier in the week put downward pressure on the Australian dollar, which was struggling to hold above US$1.02 late in trade. TD Securities noted the trade data wasn’t likely to force a rethink of policy, but it did increase the chance the RBA could cut another 25 basis points next month toward a 3% cash rate.

How did the big four Australian banks perform after the RBA decision?

The four big banks gave up some gains to finish mixed and hadn’t announced full responses to the RBA move. Reported prices in the article showed ANZ at $25.05, CBA at $56, NAB at $25.95 and Westpac flat at $25.16.

What’s happening with APN News and Media and what should investors watch?

APN News and Media slipped to 41.5 after confirming it is still reviewing its New Zealand print assets. Speculation that a buyer had been found earlier had fuelled a share-price surge, so investors should watch any formal sale or asset-review updates for impact on the stock.

Why did Boart Longyear shares rise and what’s the stock’s recent performance?

Boart Longyear rose to $1.67 after unexpectedly sacking CEO Craig Kipp as the company sought to address a plunging share price. The article noted the stock had fallen more than 30% in the past month, prompting management changes.

What practical takeaways should everyday investors get from this market update?

Headline moves can mask underlying detail—data revisions (ABS) and shifting geopolitical headlines (Spain) can create volatility. Watch central bank decisions (RBA rate cuts) for their currency and rate implications, and follow company-specific news (bank reactions, APN review, Boart Longyear leadership changes) that can move individual stocks.