Victory for Obama gives shot in arm

THE sharemarket closed higher after the re-election of US President Barack Obama gave it a boost during the last hour of trade.

By InvestSMART · 8 Nov 2012

By InvestSMART ·
8 Nov 2012

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THE sharemarket closed higher after the re-election of US President Barack Obama gave it a boost during the last hour of trade.

The benchmark S&P/ASX 200 Index rose 31.7 points, or 0.7 per cent, to 4516.5.

"The local market started off without much direction," said BBY institutional trader Anson Rosewall. "On the whole, I think people were really struggling to gauge what was going on [in the US]."

But the re-election of Mr Obama gave local investors clarity, with the market adding more than 20 points after the result was confirmed.

Just about all sectors ended higher, with gold jumping 2.7 per cent, telecoms adding 1.7 per cent, materials up 1 per cent and energy and financials both rising 0.7 per cent.

Industrials bucked the trend, slipping 0.1 per cent.

The dollar jumped to fresh five-week highs, trading around US104.55?.

The re-election of Mr Obama will help the local dollar, with the US President more in favour of quantitative easing than his Republican rival Mitt Romney. The dollar could soon push above US105?.

Mr Rosewall said that the result was also good for commodity and gold stocks.

The big miners were up, with Rio Tinto adding 0.8 per cent to $60, while rival BHP rose 0.5 per cent to $34.98. Iron ore miner Fortescue Metals gained 1.3 per cent to $4.05 and gold miner Newcrest jumped 2.3 per cent to $26.70.

News Corporation reported overnight in the US that its net profit had tripled for the first quarter of the 2013 financial year, surging to $2.16 billion, up from $715.5 million in the corresponding period last year.

"News Corp was pretty much in line with expectations, but they had some one-offs that were better than expected," Mr Rosewall said.

News Corp shares on the local market rose 74? to $24.10.

Retailer Harvey Norman reported a 10 per cent drop in sales and a 20 per cent fall in profits in the first quarter. The company's shares closed down 2.2 per cent at $1.81.

Elsewhere among retail stocks, JB Hi-Fi added 0.6 per cent to $10.05, Myer rose 0.8 per cent to $1.91 and David Jones finished flat at $2.46.

Among the banks, CBA jumped 0.6 per cent to $57.80 after it reported its first-quarter cash earnings, which came through in line with expectations at $1.85 billion.

ANZ added 1 per cent to $25.51, Westpac gained 1.3 per cent to $25.86 and NAB fell 0.2 per cent to $24.99.

Downer EDI shares soared 5.8 per cent to $3.62 after the engineering company said it was on track to achieve full-year profit expectations.

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Frequently Asked Questions about this Article…

How did Barack Obama's re-election affect the Australian sharemarket and S&P/ASX 200?

The re-election of US President Barack Obama gave the local market a late boost — the S&P/ASX 200 Index rose 31.7 points (0.7%) to 4516.5. Local traders said the result provided clarity, with the market adding more than 20 points after the US result was confirmed.

Which sectors led the gains after the US election result and what were the sector moves?

Almost all sectors ended higher. Gold jumped 2.7%, telecoms gained about 1.7%, materials rose about 1%, and energy and financials were up roughly 0.7% each. Industrials were the exception, slipping about 0.1%.

How did commodity and gold stocks react to the market rally?

Commodity and gold stocks benefited from the rally. Major miners were higher — Rio Tinto rose to about $60, BHP to $34.98, Fortescue Metals to $4.05 — and gold miner Newcrest jumped to $26.70, reflecting strength in those sectors.

What happened to the Australian dollar after the US election and why does that matter for investors?

The Australian dollar jumped to fresh five‑week highs, trading around US104.55 and the article noted it could soon push above US105. The re-election was seen as supportive for the local dollar because Mr Obama was perceived as more likely to favour quantitative easing than his Republican rival — a factor investors watch because currency moves affect earnings for exporters and import-sensitive companies.

Which company results reported in the article had the biggest impact on individual share prices?

News Corporation reported that its net profit had tripled to $2.16 billion for the first quarter, and its local shares rose to $24.10. Commonwealth Bank (CBA) reported first‑quarter cash earnings in line with expectations at $1.85 billion and its shares rose to $57.80. Conversely, Harvey Norman reported a 10% drop in sales and a 20% fall in profits and its shares closed down at $1.81.

How did the major Australian banks perform and what drove their movement?

Bank stocks generally rose after reporting results or updates: CBA jumped to $57.80 after reporting first‑quarter cash earnings in line with expectations, ANZ added to $25.51, Westpac gained to $25.86 and NAB was slightly lower at $24.99. Investors were reacting to reported earnings and the clarity from global political developments.

Were there any notable individual stock movers investors should note from the article?

Yes. Downer EDI shares soared to $3.62 (up about 5.8%) after saying it was on track to achieve full‑year profit expectations. News Corp shares rose after strong profit results, while Harvey Norman fell following weaker sales and profit guidance. JB Hi‑Fi, Myer and David Jones also showed small moves.

What practical takeaway should everyday investors draw from this market reaction to a political event?

The article shows that major political outcomes — like a US presidential re‑election — can quickly influence markets, sectors and currencies by changing expectations around policies such as quantitative easing. For everyday investors, that underlines the value of watching macro events, understanding which sectors are sensitive to policy or currency shifts (e.g., resources, gold, banks), and avoiding knee‑jerk decisions based solely on a single market reaction.