Worries over China slice early gains

THE sharemarket ended slightly higher yesterday, giving up most of strong early gains as concerns about China's economic growth came back into focus.

By InvestSMART · 14 Aug 2012

By InvestSMART ·
14 Aug 2012

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THE sharemarket ended slightly higher yesterday, giving up most of strong early gains as concerns about China's economic growth came back into focus.

The S&P/ASX 200 Index finished 6 points, or 0.1 per cent, higher at 4283.3 after surging 37 points at the start of the session.

Despite the fall in the benchmark index, the materials sector rose a robust 1.1 per cent and industrials put on 0.8 per cent. Financials fell 0.4 per cent.

The gold sector jumped 2.7 per cent, reflecting a rise in the bullion price as well as a 4.4 per cent gain by Newcrest Mining. Its shares rose $1.07 to $25.40 in response to a 23 per cent jump in full-year profit. At the close of the Sydney session, spot gold was up $US11.32 at $US1624.60 an ounce.

IG Markets strategist Stan Shamu said that, though most of the earnings reports released yesterday were positive, investor sentiment was weighed down by China failing to announce stimulus measures.

"On Friday we saw European markets fall, only to get up on US recovery on speculation that China might announce some sort of stimulus over the weekend," Mr Shamu said. "I think some investors are getting sceptical that we're not going to get stimulus any time soon."

Chinese shares in Shanghai had their biggest daily loss in nearly a month, slumping 1.5 per cent.

Several local stocks notched up fairly big gains, with BlueScope, Downer EDI and JB Hi-Fi releasing better than expected earnings results. UGL and James Hardie, however, were both under pressure.

BlueScope was the day's star performer, closing 9?, or 35 per cent, higher at 35? after the company said it planned to sell half its coated-steel products business to Nippon Steel Corp for $US540 million.

JB Hi-Fi shares rose 53?, or 5.8 per cent, to $9.75 after it said full-year earnings had fallen 5 per cent but that it expected sales to grow in the year ahead.

Downer EDI posted a net profit of $112.8 million for the year to June 30, sending its stock up 35?, or 11.2 per cent, to $3.47.

UGL's shares fell $1.37, or 10.6 per cent, to $11.49 after a 15 per cent drop in full-year profit.

James Hardie posted an improved net profit of $US68.5 million for the three months to June 30, but the shares fell 6.1 per cent to $7.77. AAP

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Frequently Asked Questions about this Article…

How did the S&P/ASX 200 perform today and what caused the early gains to fade?

The S&P/ASX 200 finished modestly higher, up 6 points (0.1%) at 4,283.3 after an early surge of 37 points. Markets gave up much of those early gains as concerns about China’s economic growth and the lack of announced stimulus returned to focus, tempering investor sentiment.

Which sectors led the market and why did materials and industrials outperform?

Materials rose about 1.1% and industrials gained roughly 0.8%. The outperformance was driven by strong company earnings and commodity-related moves—several local industrial and materials stocks reported solid results, while a rise in bullion supported miners and the broader materials group.

Why did the gold sector jump and how did Newcrest Mining perform?

The gold sector jumped about 2.7% as spot gold rose US$11.32 to US$1,624.60 an ounce. Newcrest Mining performed well alongside the sector, gaining about 4.4% after reporting a 23% jump in full‑year profit; its shares rose $1.07 to $25.40.

What impact did China’s stimulus uncertainty have on markets and investor sentiment?

IG Markets strategist Stan Shamu said investor sentiment was weighed down because China failed to announce stimulus measures. That uncertainty helped erase some earlier gains, and Chinese shares in Shanghai fell about 1.5%, their biggest daily drop in nearly a month.

Which local companies reported better-than-expected results and saw notable share gains?

BlueScope, Downer EDI and JB Hi‑Fi reported stronger-than-expected results. BlueScope was the day’s top performer—rising sharply after announcing plans to sell half its coated‑steel products business to Nippon Steel for US$540 million. Downer EDI posted a net profit of $112.8 million for the year to June 30 and its shares rose about 11.2% to $3.47. JB Hi‑Fi’s shares climbed roughly 5.8% to $9.75 after it said full‑year earnings fell 5% but it expects sales growth ahead.

Which stocks were under pressure after reporting results and what were the reasons?

UGL and James Hardie were under pressure. UGL’s shares fell $1.37 (around 10.6%) to $11.49 after a 15% drop in full‑year profit. James Hardie, despite reporting an improved net profit of US$68.5 million for the three months to June 30, saw its shares fall about 6.1% to $7.77.

How did financial stocks perform during the session?

Financial stocks were weaker on the day, with the financials sector down about 0.4%, which partly offset gains in materials and industrials and weighed on the overall benchmark.

What should everyday investors take away from today’s market moves related to earnings and China news?

Today’s session shows markets can be pushed around by company earnings and macro headlines—strong corporate results can lift sectors (like materials and industrials), while uncertainty over China and stimulus can quickly curb gains. For everyday investors, that highlights the potential for short‑term volatility when major earnings or macro developments arrive.