Upwards and onwards but investors are wary

'There's just no real volume or confidence in the market.' RBS Morgans senior equities adviser Geoff Voller

By InvestSMART · 29 Sep 2011

By InvestSMART ·
29 Sep 2011

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THE sharemarket rose almost 1 per cent in the second day of gains, as markets recovered from last week's massive losses on hopes of a solution to Europe's debt crisis.

However, investors remained unsure whether a solution to the crisis could be found amid conflicting media reports. IG Markets' dealer Chris Weston said the local market was "delicately poised".

Investor confidence that Europe would announce fresh measures to stave off contagion of a Greek default, including expanding its European Financial Stability Fund, unravelled somewhat, he said.

The benchmark S&P/ASX200 index rose 34.9 points, or 0.87 per cent, to close at 4039.5, while the broader All Ordinaries index put on 34.2 points to 4097.7.

Patersons Securities associate director John Curtin said a rise in commodity prices overnight had kept the market in recovery mode after last week's massive losses.

Consumer discretionary stocks led the market, closing 1.4 per cent higher, with department store giant David Jones gaining 4.6 per cent to $2.93 and fellow retailer Myer rising 4.5 per cent to $2.10.

There were broad-based gains across all sectors except for health care stocks, which lost 0.2 per cent. Energy stocks rose 1.4 per cent after world oil prices soared on Tuesday night, mirroring gains on world equity markets. Woodside Petroleum gained 3.5 per cent, or $1.08, to $31.94 and Santos added 3? to $11.06.

But RBS Morgans senior equities adviser Geoff Voller said trade had been sluggish and volumes relatively light given a strong lead from global markets overnight.

Turnover was 2.22 billion shares changing hands for $6.03 billion, with almost seven of every 10 stocks rising. "It was a bit of a disappointing reaction but given the uncertainty in Europe I suppose it's not too surprising," he said.

"There's just no real volume or confidence in the market," he said.

Chemical manufacturer Orica's shares jumped 3.7 per cent to $23.20 despite higher than permitted mercury vapour levels being detected around its Sydney plant.

Drilling services group Boart Longyear was the best performing stock, gaining 6.1 per cent to $2.80 while Fortescue Metals was the worst, losing 7.9 per cent to $4.52.

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Frequently Asked Questions about this Article…

Why did the Australian sharemarket rise almost 1% on the day covered in the article?

The market recovered from the previous week's big losses on hopes Europe would act to contain its debt crisis and after a rise in commodity and oil prices. The S&P/ASX200 climbed 34.9 points (0.87%) to 4,039.5 and the All Ordinaries rose 34.2 points to 4,097.7, with consumer discretionary and energy stocks helping lead the gains.

How did investor confidence respond to news about Europe’s debt crisis?

Investor confidence was cautious and mixed. Hopes for fresh European measures to limit contagion from a possible Greek default helped markets, but conflicting media reports left investors unsure. IG Markets’ dealer Chris Weston described the local market as “delicately poised.”

What were the trading volumes and market breadth on the day?

Turnover was 2.22 billion shares for A$6.03 billion, with almost seven out of every 10 stocks rising. Despite the gains, RBS Morgans’ Geoff Voller said trade was sluggish and volumes relatively light, reflecting limited market confidence.

Which sectors performed best and worst that day on the ASX?

Consumer discretionary stocks led the market, up about 1.4%, while energy stocks also rose roughly 1.4% following higher world oil prices. Health care was the laggard, slipping about 0.2%.

How did major Australian retailers fare — what happened to David Jones and Myer shares?

Department store giant David Jones jumped 4.6% to A$2.93 and fellow retailer Myer rose 4.5% to A$2.10, helping drive the consumer discretionary sector’s gains.

What drove gains in energy stocks, and how did Woodside and Santos perform?

World oil prices soared overnight, which supported energy-sector gains. Woodside Petroleum rose about 3.5% (up A$1.08) to A$31.94, while Santos added roughly 3% to A$11.06.

Were there notable company-specific moves mentioned in the article?

Yes. Chemical maker Orica jumped 3.7% to A$23.20 despite reports of higher-than-permitted mercury vapour levels around its Sydney plant. Drilling services group Boart Longyear was the best performer, up 6.1% to A$2.80, while Fortescue Metals was the worst performer, down 7.9% to A$4.52.

Given the rise, should investors feel confident the recovery will continue?

The article suggests caution: while markets rose on hopes of European action and commodity gains, trading was light and investor confidence remained fragile. Analysts noted uncertainty around Europe and a lack of strong volume, so the recovery looked tentative rather than assured.